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A PRIMER OF 
POLITICAL ECONOMY 



-y^y^ 



A PRIMER 



OF 



POLITICAL ECONOMY 



AN EXPLANATION OF FAMILIAR ECONOMIC 
PHENOMENA, LEADING TO AN UNDER- 
STANDING OF THEIR LAWS AND 
RELATIONSHIPS 



BY 

S. T. WOOD 



3 e « s J » 



THE MACMILLAN COMPANY 

LONDON : MACMILLAN AND CO., Ltd. 
1901 

All rights reserved 



^^J'«^ 



THE LIBRARY OF 

CONGRESS, 
Two C0PIE8 Recbved 

SEP. 17 1901 

Copyright entry 
CLASS <^ XXo. Nd. 

cePY 8. 



Copyright, 1901, 
By the MACMILLAN COMPANY. 



NorinooD ^tees 

J. S. Cusbing & Co. — Berwick & 
Norwood Mass. USA. 



PREFACE 

The most noteworthy feature of organized 
society to-day is the tendency toward govern- 
mental interference in every kind of productive 
effort. Almost every useful act, from the sell- 
ing of a cup of tea to the building of a steam- 
ship, is supervised, taxed, or helped by some 
municipal, provincial, state, or national author- 
ity. The civil authorities tax, license, or inter- 
fere with butchers, cabmen, restaurant keepers, 
theatre managers, pedlers, manufacturers, sec- 
ond-hand dealers, and proprietors of great mer- 
cantile establishments. The taking of wealth 
from the forests, the mines, and the fisheries 
is also under legislative control, and is helped 
and obstructed in many ways. The national 
authority or government shows the same con- 



vi Preface 

fused variety of plans in dealing with trade and 
industry. Purchases of material are discour- 
aged for one use and aided for another ; some 
lines of industry and trade are helped, others 
obstructed, and others so burdened as to be 
made unprofitable. 

In all this there is a marked absence of 
method or principle. With the growth of 
popular government the duty of guiding this 
complicated policy of interference falls ulti- 
mately on the electors. This fact emphasizes 
the need of giving greater thought to a line of 
study too much neglected. The wisdom or 
folly of these varied courses of action must 
be decided by the voters at the polls, and they 
must select the truth from a bewildering maze 
of argument and controversy, wise, fooHsh, and 
sometimes personally interested, as varied as 
the undertakings of constituted authority. The 
duty of citizenship imposes the necessity of 
understanding the principles involved in the 



Preface vii 

complicated processes of commerce by which 
we live, and with which our elected representa- 
tives are constantly interfering. Education is 
assumed as a public duty, that the people may 
protect themselves from bad or incompetent 
citizenship, and for that desirable end, which 
justifies education at pubHc expense, no study 
or investigation is more valuable than that of 
the laws of economics, — the science which 
teaches how we use, for man's benefit, the re- 
sources of nature and the discoveries of all 
other sciences. 

The object of this book is to afford a ground- 
work for economic study, to explain some of 
the actual economic phenomena passing through 
our hands from day to day, that their laws, 
principles, and relationships may be more in- 
telHgently studied and more clearly understood. 
Everything has been brought within the com- 
prehension of pupils in the fourth forms of the 
public schools. This has necessitated conden- 



viii Preface 

sation rather than elementary departures, for 
it is the simplicity and not the complexity of 
economic principles that makes them so elusive, 
even to mature intellects. The reader, and 
especially the student, is asked to remember 
that this book is virtually a condensation, and 
to extend in thought that which is but touched 
upon or briefly outlined. 



CONTENTS 



CHAPTER 

I. The Herdsman of the Plains 

II. How Oil is obtained 

III. In the Heart of a Mountain 

IV. Making Bleaching Powder . 
V. Gathering India Rubber 

VI. In a Shoe Factory 

VII. The Law of Supply and Demand 

VIII. Taxation 

IX. John must pay for the Boots 

X. Coins and Currency 

XI. National Banks, Gold and Silver 

XII. British Currency . 

XIII. Paying All the Workers 

XIV. The Capitalist 
XV. Interest — Joint Stock Companies 

XVI. Governmental Interference 

XVII. Schemes for Betterment 



Trusts 



PAGE 
I 

8 
IS 

22 
28 

33 

42 

SI 

64 

72 

S3 

9S 

102 

109 

116 

127 

134 



INTRODUCTION 

Sitting at breakfast in the morning, a man 
seldom reflects that for his personal satisfaction 
the good and useful fruits of the earth and 
products of labor have been gathered from 
every quarter of the globe. Beside his plate, 
which has been made in Staffordshire, is a 
spoon from the Oneida Community works in 
New York State and a knife and fork from 
Sheffield, with handles of wood from Africa 
or horn from South America. He sits on a 
chair made of wood from Northern Canada, 
varnished with the resin of a tree in Burmah 
or Japan, dissolved in turpentine from the sea- 
pines of the Landes Department of France or 
the swamp-pines of Alabama. The seat is of 
cane from the Malay peninsula. His table- 



xii Introduction 

cloth and napkin are from Belfast. He has 
tea from China or Japan, coffee from Java or 
Brazil, bread from wheat grown in the Canadian 
Northwest, leavened with yeast from Germany. 
He has canned salmon from British Columbia 
or canned rabbit from Australia, sealed in tin 
from Wales. His breakfast is cooked with coal 
from Pennsylvania, on a stove made of Indiana 
iron, and surmounted with pipes of sheet iron 
from the penal colony of Siberia. His salt is 
from Goderich, his pepper from Ceylon or 
South America, and his sauce from Worcester- 
shire. He has butter from a neighboring farm, 
perhaps colored with annotto from Cayenne. 
His buns are made more palatable by a few cur- 
rants from Greece. 

The commerce which enables a man to obtain 
for his own use the products of all parts of the 
world must be complicated and wonderful. He 
may be a carpenter or bricklayer, a physician, 
a lawyer, or a teacher, he may work in a great 



Introduction xiii 

factory feeding material to a machine which 
does but one of many operations necessary to 
the making of some article in common use. 
Yet for this single useful service, useful only 
as a help to many others, he is able to secure 
the many and varied products of the world's 
industries. 

When it is remembered that the production 
of any one of the things gathered at the break- 
fast table requires the aid of many hands, trained 
in various lines of industry, and working in dif- 
ferent climes and continents, the truly complex 
nature of the world's commerce becomes appar- 
ent. Through this intricate commerce we live 
by satisfying each other's wants. By following 
one line of industry and becoming specially 
proficient, each is able to secure a share of the 
products of all the others. To accomplish that 
end in a community in which each is careful 
of his own property and jealous lest others may 
obtain that which is his, is the aim of our trade 
and industry. 



xiv Introduction 

Every useful service rendered for reward, 
whether the building of a wall, the cooking of 
a meal, the making of a shoe, the teaching of a 
lesson in school, the navigation of a ship, or 
the digging of ore in the mine, is a part of this 
complicated mechanism, having a relation to 
all the other parts. Here is something mar- 
velous with which we are surrounded, which we 
must touch at every turn, which has an influ- 
ence in settling all the practical questions of 
daily life, and which we should study and seek 
to comprehend. The easiest road to an under- 
standing of our complicated industrial and com- 
mercial mechanism may be found in the analysis 
of a single transaction, and for that purpose let 
us select the purchase of a pair of boots in a 
city store. 



A PRIMER OF 
POLITICAL ECONOMY 



A PRIMER OF POLITICAL 
ECONOMY 

CHAPTER I 

THE HERDSMAN OF THE PLAINS 

John Doe, a farmer, comes to the city to 
buy a pair of boots. He could not make them, 
nor could he learn in a lifetime the various 
processes by which they have been produced 
from the manifold products of nature. He 
lives by satisfying other people's wants, and 
has just sold a load of wheat at a gigantic 
elevator, where it was whisked about with 
belts, buckets, and revolving screws, to be de- 
posited in a great bin with more of the same 
kind from farms in all parts of the country. 
For the wheat he received several bank notes, 



2 A Primer of Political Economy 

some new and crisp, others worn by use, but 
each bearing an elegantly written promise that 
a well-known bank would pay bearer on de- 
mand five dollars. John gives no thought to 
this promise, so familiar is he with its common 
results, and he looks at the notes only to make 
sure that each has a big figure "5" in the 
corner. He has parted with a load of good 
wheat, and has nothing but a few pieces of 
stamped paper in his pocket. But each paper 
is a promise that a solvent bank will give him 
a stated quantity of gold on demand. The 
merchant hands out a pair of boots, accepts 
one of the bank notes in payment, and gives 
back in change, either a big silver coin called 
a dollar, a silver certificate stating that a dollar 
is payable to bearer on demand, or a treasury 
note promising one dollar in " coin." To make 
the change even John also receives a silver coin 
marked "quarter dollar." The transaction is 
so common that it seems scarcely worth de- 



The Herdsman of the Plains 3 

scribing, but a glance at some of the essential 
preparatory work shows it to be one of the 
most complicated and even mysterious events 
of human experience. 

Let us go back two years. The leather, 
now so black and shining that John Doe re- 
gards it with pride, was then the hide of a 
cow running freely in a herd on the plains of 
Argentina. A young Gaucho is snatching a 
few minutes' sleep on the ground, the moon- 
light on his upturned face, and his horse, with 
high and heavy leather trappings, tethered 
close by. A small cloud passes swiftly across 
the moon, and in the momentary darkness a 
perceptible shudder runs through the herd of 
cattle, appearing as a black mass on the close 
horizon of the night. Another cloud bigger 
and blacker passes over, and in the longer 
interval of eclipse the cattle grow more ner- 
vous and restless. Soon the clouds seem to 
settle down from all parts of the sky, and a 



4 A Primer of Political Economy 

dull shuffling sound tells that the herd is mov- 
ing. The horse paws the ground uneasily, and 
the young Gaucho awakes. A glance at the 
dark, lowering sky reveals the whole situation, 
and he mounts nimbly into the saddle, urging 
his horse toward the restless herd. His fa- 
miliar voice and form have a quieting effect, 
and he turns the leaders that have already 
started toward the invisible blackness of the 
open prairie. The clouds lower, and as the cold 
dampness of the air threatens a storm, the 
cattle grow still more timid and uneasy. A 
movement in another direction is turned back 
by another gallop around the herd, and as the 
leaders turn among the slower cattle, there is 
a momentary quietness. But as the young 
Gaucho gallops round and round in the dark- 
ness, the storm approaches, and he sees 
that the cattle are growing more and more 
alarmed. 

The next break-away is turned with the great- 



The Herdsman of the Plains 5 

est difficulty, and the herdsman realizes that 
the camp must be aroused. Galloping off to 
his sleeping companions, he gives the familiar, 
alarming yell, returning at full speed to the herd, 
which seems now moving restlessly like a great 
black monster, eager to exhaust its strength in a 
blind rush over the limitless plain. The sleep- 
ing Gauchos awaken with thought of marauding 
and murderous Indians from the distant hills, 
tempted to pillage by the presence of the herd. 
But the black sky and the first drops of the 
coming shower are recognized as warnings of 
a stampede. They rally to work, not to fight, 
and as they reach the herd they find the rest- 
less animals eager to break away in terror of 
the storm. 

Four fresh riders, turning back the more 
eager animals, keep the herd in better order 
for a time, but with the first clap of thunder 
there is a wild stampede, and the great mass 
of animal life gallops over the black prairie 



6 A Primer of Political Economy 

as if moved by a single impulse. A flash of 
lightning shows their heaving black forms and 
lowered heads, and the five Gauchos galloping 
sullenly beside them. The thunder follows 
quickly, and seems to shake big drops of rain 
from the clouds overhead. The cattle are in 
full stampede, and through the flashes of light- 
ning that rend the dome of blackness, the 
cannonading of the thunder and the drenching 
downpour, the herdsmen press forward beside 
them. Experience has long ago taught them 
the impossibility of stopping the mad rush of 
terrified cattle, but by riding dangerously close 
beside the leaders they can turn the herd before 
it reaches the river. As the strength of the 
animals begins to wane, they are turned more 
and more to the right by the daring riders, 
who press the leaders closer and closer, and 
before the darkness of the storm gives place 
to the coming day the herd is rounded up, 
panting and exhausted, while the wet and 



The Herdsman of the Plains 7 

weary Gauchos are sleeping on the damp 
tuft-grass of the plain. 

And what has this to do with the purchase 
of a pair of boots ? At the killing round-up 
these animals are inspected, and all of suitable 
age and condition selected for slaughter. Of 
the hides some are shipped to Britain, tanned, 
curried, and returned across the ocean to the 
shoe-factories of Canada and the UniteB^ States. 
Thus the Gauchos of the plains of Argentina 
galloping after the stampeded cattle help to 
make the pair of boots selected and bought 
by John Doe. 



CHAPTER II 



HOW OIL IS OBTAINED 



Away in the north Atlantic Ocean all hands 
on a sailing vessel are eagerly hurrying to 
lower the small boats. They have been called 
up before daylight, the watch who have just 
been relieved as well as the others who have 
been sleeping, and the threatenings and abuse^ 
of the officers make every one work with eager 
energy. The lookout in the crow's-nest has 
sighted a shoal of whales, and his drawling, 
singing "blow" has aroused the whole ship to 
activity. He sees the bushy clouds of foam 
rising from the water, and announces a small 
" pod " of cows with two or three bulls to the 
north of them. Four boats are lowered with 
a run from the creaking pulleys, and the crev/s 
8 



How Oil is Obtained g 

slide down the ropes, every man to his place. 
Each boat hoists a sail as soon as it is clear 
of the ship, and the mate leads in the direction 
pointed out from the crow's-nest. 

The harpooner stands in the bow, with a 
harpoon gun pointing forward, and pivoted so 
as to be guided easily in any direction. To 
the barbed missile in the gun is attached a 
manila rope about eighteen hundred feet long, 
which is carefully coiled into tanks so that it 
will pay out when a harpooned whale dives. 
There are also several lances — keen-pointed 
and edged spears about eight feet long — for 
killing the whales which have become ex- 
hausted in struggling under the torture of the 
attached harpoons. The boats separate, and are 
ghding along like small yachts in a contest of 
speed, when all round up at once into the 
wind and lie rocking on the swells. The look- 
out in the crow's-nest has signalled that the 
whales have gone down, and it is known that 



10 A Primer of Political Economy 

the passing of a small boat over them would 
give the alarm and ruin the chance of killing 
them, or even seeing them again that day. 

Soon the rising of the cloudlike jets of foam 
from the sea tells where the great monsters 
have risen to the surface. The boats are put 
about with but little noise, even the mate giving 
orders and uttering threats under his breath. 
A bull whale is lying near like a smooth, black 
island of flesh, and the mate's boat rounds 
from behind out of his range of vision. As 
the port bow bumps against the monster's side, 
the harpooner fires his barbed spear into the 
yielding flesh. The great mass suddenly be- 
comes animated, and the boat's crew make 
desperate efforts to get out of danger. The 
whale rolls from side to side, writhing in con- 
vulsions, raising his gigantic tail into the air 
and lashing the water into foam with deafening 
blows. Suddenly he goes down, almost cap- 
sizing the small boat with the swell of his 



How Oil is Obtained 1 1 

descent. The line flies around the loggerhead 
until the first tank is empty and a large part 
of the second coil is out. Every effort of the 
harpooner to tighten the turns pulls the boat's 
head down and threatens to swamp her. The 
slacking of the line comes suddenly, and the 
crew begin to haul in, stowing the manila rope 
in a large coil aft. The mate stands with lance 
in hand and watches the water closely as the 
line comes in. When the great black mass 
rises above the surface, it is apparently as life- 
less as it seemed when the boat stole silently 
upon it. The lance thrown by the mate sinks 
into the oily flesh up to the handle, as a knife 
sinks into soft butter, and again there is a 
lashing of the water and a dive, but more feeble 
than before. Again the whale comes to the 
surface, and after two more lances have been 
buried in his yielding flesh the signal is given 
to the ship that a catch has been made. 
The other boats have been less fortunate. 



12 A Primer of Political Economy 

One was smashed by a blow from a har- 
pooned bull, and the crew were rescued after 
sitting up to their necks in water for half an 
hour, supported by the splintered planks, ribs, 
and thwarts. Another had to cut a line en- 
tangled on the loggerhead, to avoid being 
swamped, and the fourth failed to fix a har- 
poon, although near enough on two occasions 
to risk a shot. 

A scaffolding of planks is rigged out from 
the ship's side, about five feet above the 
water, and the carcass of the whale is 
brought alongside below it and fastened by 
chain slings. The gigantic head is partly cut 
from the body with great spade-like knives 
about twelve feet long, which sink into the 
soft blubber of the whale almost with their 
own weight. After the under jaw is de- 
tached and hoisted aboard with groaning, 
creaking tackle, the body is attacked by men 
on the platform. Deep diagonal cuts are 



How Oil is Obtained 13 

made through its coating of fat, which is torn 
off by tackle in "blankets" about five feet 
wide and a foot thick, and hoisted on deck. 
Others are working vigorously in an endeavor 
to sever the head, and the chains and pulleys 
are operated from the deck to help them. 
When at last the neck is cut through, the 
head is towed astern, and the tearing of 
blankets of flesh from the body continues. 
After the carcass is stripped, it is cast loose 
to feed the gulls and other scavengers of the 
sea, and the strongest tackle is made ready 
to hoist the head aboard. The great mass is 
as big and as heavy as three full-grown ele- 
phants, yet the straining ropes and chains 
slowly raise it from the water and swing it 
on deck. A mass of fat is cut from the 
snout, and an opening is made into a cistern 
of pure spermaceti in the head, as clear as 
water. This is bailed into tanks, and the rest 
of the mass is hauled to the lee rail, waiting 



14 A Primer of Political Economy 

till a roll of the ship takes it overboard. 
The blubber is cut in strips and fed into the 
try-works, great boilers for melting it into oil, 
and the men who stand by to feed it bail out 
the oil into barrels. The refuse that will not 
melt is the only fuel used, and the works are 
so constructed that there is no possibility of 
the fire reaching the oil. The work goes on 
for four days, and when the decks are 
scrubbed to their accustomed whiteness, and 
the casks stowed and lashed below, it is 
found that the whale has yielded forty barrels 
of oil. 

These bullying and working officers and 
silently working men have been helping to 
make the pair of boots that John Doe 
bought. The oil they melted out was used in 
currying the soft upper leather, and their 
whale chase was a part of the process of 
shoemaking. 



CHAPTER III 

IN THE HEART OF A MOUNTAIN 

An adventurous climber on a lofty peak in 
the Selkirks hears, when pausing to rest, a 
rapid, jarring pulsation in the heart of the 
mountain, like the ticking of a giant watch. 
The snow lying everywhere about is soft with 
the slow warmth of early summer, but it does 
not seem to melt or grow less. Down in the 
valleys the rocks are bare, and the few patches 
of soil watered by the mountain streams are 
green. The pulsations continue and invite an 
investigation. Away down the side toward 
the valley is a heap of broken rock, looking 
in the deep distance like a new excrescence 
on the ancient face of the mountain. On a 
nearer approach it is seen to be a large 
15 



i6 A Primer of Political Ecojiomy 

irregular pile of broken stones scattered 
loosely down the slope. It is like a door-sill 
to a cavernous hole in the rock, from which 
a hand-car is pushed by a man in overalls 
and smock. The contents of the car are 
dumped over the face of this pile, to which it 
makes an imperceptible addition. 

Let us light our wax candles and follow 
the miner who has pushed his empty hand- 
car back into the tunnel. We must stoop 
under the low roof, from which the water is 
constantly dripping, and follow the narrow 
rails as they curve along the damp tunnel. 
At one point a candle is burning in a steel 
ring, hooked on a small ledge of rock. Just 
under it is a black hole, and the light warns 
us of an open winze, one hundred feet deep, 
to a lower level of this extensive mine. 
Every sound seems to have many echoes 
coming from the solid rock overhead and all 
about. The lioht of another candle shows 



In the Heart of a Mountain 17 

two men drilling into the rock. One is hold- 
ing and turning a drill, while the other 
strikes it with a sledge hammer, and we 
wonder at the long swinging blows he can 
strike, in a place where there is scarcely 
room to turn about. Farther along the main 
tunnel the miner is reloading his hand-car 
with the rock or ore that comes from an 
opening between some timbers standing from 
the floor to the roof. A few feet away is 
the skip, a small elevator for hoisting ore, 
but big enough for two to stand in if cling- 
ing closely to the rope. Up it goes with 
speed to the higher level, and here the secret 
of the mountain's pulsation is revealed. Three 
compressor drills are in operation, and each 
is shooting out a drill and boring into the 
rock at a speed that makes the sledge of the 
worker on the lower level seem tiresome in 
its sloth. Each drill pounds into the rock so 
quickly that a continuous stream of dust runs 



1 8 A Primer of Political Economy 

from it. The power from this machinery is 
generated by a great steam engine down in 
the gulch, where air is forced into a large 
cylinder at high pressure. From this a pipe 
is laid up the face of the mountain and 
along the tunnel to the chief parts of the 
mine. This pipe is connected to the cylinder 
of the compressor drill, and the force of com- 
pressed air drives the drills into the rock 
with rapid blows. The air thus brought in 
also serves for ventilation, and makes life 
endurable in the narrow confines of the^ tun- 
nels, shafts, and drifts. The skip rises to 
where other compressor drills are boring 
holes into the narrow roof. 

The ore is in a vein from three to six 
feet wide, cutting through a part of the 
mountain. The tunnels are run along this 
vein, and during every shift or working period 
a part of the roof of each is honeycombed 
by the drillers. The holes are charged with 



In the Heart of a Mountain 19 

dynamite, and after the miners leave for their 
rest, the charges are exploded by an electric 
current. The ore thus detached is gathered 
up by the next shift, lifted by the skip or 
shovelled into the chutes as convenient, loaded 
on the small hand-cars, and pushed out on 
the dump. It is raw-hided down the face of 
the mountain, that is, tied in soft cowhide 
bags, and hauled by sure-footed mules to the 
station of a narrow-gauge railway, where it 
starts on its trip to the smelter. There it is 
piled in a heap on a layer of kindling wood, 
which serves to ignite it. After burning with 
a sulphurous flame, and giving off stifling 
fumes for two or three weeks, it cools off 
and is charged into the smelting furnace, 
mixed in layers with coke. This is ignited, 
and the heat is intensified by blasts of air 
till it pours out in a red molten stream. It 
falls into another furnace, where the fire still 
keeps it in a liquid mass. The metal sinks 



20 A Primer of Political Economy 

to the bottom, while the melted rock and 
other waste flow off from the top and are 
carried away in fine black crystals by a 
stream of water. From an opening in this 
furnace the metal, at blinding heat, crawls 
out into hollows in the ground, where it is 
allowed to cool. It is then called matte. 
There are several other furnaces, some burn- 
ing coal, others coke or wood, through which 
it must pass before it is cast into conven- 
iently sized plates of yellow metal. These 
plates are the anodes, which are shipped 
away to the Atlantic seaboard, where a sup- 
ply of ingredients from other mines in other 
parts of the world facilitates the refining 
processes. There the gold, silver, and copper 
are finally separated. The copper goes to a 
brass foundry, where it is mixed with zinc 
from Cartagena in Spain, and made into brass. 
From this brass were made the long nails 
which appear as regular rows around the 



/;/ the Heart of a Mountain 21 

heels of the boots purchased by John Doe 
after selling his wheat. The miners in the 
heart of the mountain were unconsciously 
helping to make boots. 



CHAPTER IV 

MAKING BLEACHING POWDER 

Within high walls and surrounded by build- 
ings, sheds, and tall chimneys in a Lanca- 
shire town, half a dozen strange-looking men 
are shovelling a whitish powder from heaps 
on the paved ground into large barrels. 
These men have flannel cloths wound many 
times over their mouths and noses, and above 
these muzzles, ^which make their heads appear 
distorted, are goggles which hide and pro- 
tect their eyes. Their feet and legs are 
also wrapped in flannels, and they are so 
clothed as to look hke moving bundles of 
rags. One of them shouts, ** Roger is com- 
ing," and all drop their shovels and run 
helter-skelter, while behind them a strange 



Making Bleaching Powder 23 

green fog or mist is carried along by the 
wind. When this fog disappears, they return, 
laughing and joking, to their work, as if 
there was no danger or discomfort in it. 
The green fog is deadly gas of chlorine, 
which, pumped on slaked lime, changes it 
into bleaching powder, and while the packers 
are certain to contract asthma and other dis- 
eases, they are also liable at any time to be 
caught by the deadly gas which they nick- 
name " Roger." To breathe it is almost inva- 
riably fatal, and the victim is carried to his 
home, where he dies in a few hours. In spite 
of the protection of flannel and goggles the 
gas and powder cause many distressing ail- 
ments, and shorten the lives of the workers. 
The shovellers must leave their work every 
few minutes to get a breath of fresh air. 

In another part of the works are men 
laboring before great furnaces. Each has a 
large bunch of oakum in his mouth to keep 



24 A Primer of Political Economy 

him from inhaling the poisonous gas escaping 
from the salt cakes, which he is turning and 
drawing from the glaring, heated aperture. 
With two towels he manages to wipe the per- 
spiration from his face, one towel being in 
use while the other is drying, and there he 
works in the heat for eight hours with 
scarcely a minute to snatch a bite of food. 
The work of the salt-cake men consists in 
baking common salt and treating it with vitriol 
to make muriatic acid, such as tinsmiths use 
in soldering. They can be recognized any- 
where by the effect of the poisonous gases 
they are compelled to breathe, which not only 
destroy the lungs, but attack the teeth, causing 
them to decay rapidly and fall out. A salt- 
cake man has no teeth, or perhaps a few 
blackened stumps remain, and as he is unable 
to chew his food, indigestion as well as diseased 
lungs adds to his afflictions. The effect of 
this work is noticeable in less than a year. 



Making Bleaching Powder 25 

In another building are men shovelling slaked 
lime, turning it over and over until it is finally 
loaded into the lifts that convey it to a chamber 
where it is treated with chlorine. The white 
particles of lime are in the air all about them, 
and here again each has a big bunch of oakum 
in his mouth to prevent him inhaling the irri- 
tating and burning dust. At this they can work 
only twenty minutes at a time, with a short 
interval of rest, for a shift of seven hours. 
After the day's work they wash themselves 
with oil or tallow, for the application of water 
to their faces or hands, with every pore filled 
with lime, would cause terrible, if not fatal 
burning. At this work there is a tendency 
to many diseases always associated with the 
handling of lime, and blindness from the 
alkaline burning is not uncommon. 

On each side of a long corridor are small 
sheds which seem like infirmaries for the 
victims of the deadly gases and the corrosive 



26 A Primer of Political Economy 

acids and dusts of the works. In these sheds 
are the half-bhnd victims of lime-shovelling, 
the asthmatic and decrepit packers, the tooth- 
less salt-cake men and the used-up vat men, 
barrow men, and general workers. There they 
sit day after day, breaking the stones from 
which sulphur is to be extracted, and the click 
of their hammers has won for them the jocular 
name of the hand-bell ringers. This is the 
last occupation about the works, and as the 
men weaken at it, they are reriloved to the work- 
house, their places being filled by others unfit 
for the more arduous occupations. These men 
are not old, for the work is such that they 
seldom or never live to an advanced age. 
Every branch of the work is dangerous and 
destructive. They are obhged to clothe them- 
selves in woollens, as the gases would destroy 
cotton or linen in a few days. 

But in enduring these hardships the work- 
men have been helping to make the pair of 



Makiitg Bleaching Powder 27 

boots which John Doe purchased. The bleach- 
ing powder was used to whiten the linen lining, 
and the muriatic acid was used in combination 
with other chemical agents in separating the 
copper used in making the eyelets, hooks, 
and nails. 



CHAPTER V 

GATHERING INDIA RUBBER 

In a dense jungle by the Amazon River a 
half-naked Brazilian native is chopping his 
way through the close luxuriant foliage. He 
swings his great knife with vigor and energy, 
chopping off the stems and stalks that impede 
his progress, and gradually forcing his way 
in the twilight of the perpetual shade. The 
rank vegetation under his feet makes a cover- 
ing for the wet soil, and he looks strangely 
diminutive under the giant palms, ferns, and 
other growths of the moist tropical climate. 
A large gourd is slung over his shoulder, and 
with every move there is a clicking and rat- 
tling within it. The sound seems a break in 
the utter loneliness of his slow march. He 
28 



Gathermg India Rubber 29 

finds a large, robust tree, and proceeds with 
easy deliberation to chop off the outside bark. 
With his small axe he smooths a part of the 
surface and makes a deep cut into the inner 
bark, from which a creamy milk begins to 
exude. A small earthenware cup is hung below 
the cut, and before he leaves, the tree has half 
a dozen suspended around it, each catching a 
slowly oozing thread of milk. He cuts his 
way through the foliage to another tree and 
repeats the operation, leaving another circle 
of cups catching the liquid. When some twenty 
trees have been tapped, he returns to the hut 
which he has built of the great leafy vegeta- 
tion all about him, and eats his lonely meal. 
In the evening he starts out to gather the cups 
and empty them into the gourd, when he finds 
he has about a gallon of the milk as a result 
of his first day's work. 

Next morning he starts out again, and cuts 
another series of gashes in each tree, a little 



30 A Primer of Political Economy 

lower than the first. The cups are again hung 
to catch the milk, and in the evening it is 
gathered into the gourd. Three or four days 
are thus spent in collecting, and when the 
gourd is nearly full, the work of drying com- 
mences. For this purpose a smoking fire is 
built in the hut, the fuel being the nuts of some 
adjacent palm trees. A clay funnel is placed 
over the fire so as to exclude all draft and 
produce a steady smoke, and the native com- 
mences operations by dipping a large wooden 
paddle into the gourd, and waving it in the 
ascending smoke. The clinging milk rapidly 
coagulates, and the paddle is again dipped 
into the gourd and held in the smoke. With 
each new coating of milk the quantity of rubber 
clinging to the paddle increases, and the native 
works away, blinking in the ascending column 
of smoke. When a large cake of rubber has 
accumulated on the paddle, a cut is made along 
one of the edges and the mass is peeled off. 



Gathering India Rubber 31 

The process is repeated till all the milk in the 
gourd has been transformed into black moulds 
of rubber, and the native starts out to tap the 
trees for a new supply. 

When he has accumulated as many moulds 
of rubber as he can carry, he tramps back to 
the house of the merchant and landowner who 
has supplied him with the utensils of his work. 
The moulds of rubber are weighed and credited 
to his account by the merchant, who is at once 
his landlord, employer, and selling agent, and 
he starts back into the jungle with a fresh 
supply of food and other necessaries. The 
merchant also supplies his wife and family with 
such things as they require, and the account 
goes on unsettled from year to year. 

This man struggling through the dense 
jungle, often suffering from the fevers that 
lurk in the swampy exhalations, is also helping 
to make the boots purchased by John Doe. 
The rubber which he collects is shipped to 



32 A Primer of Political Economy 

England, or New York, and is subjected to 
various manufacturing processes according to 
the use for which it is intended. Some of it is 
used in making the cement or paste that unites 
the linings and facings in this pair of boots. 
John Doe knows nothing of the work of the 
native, amid the rank vegetation of the Ama- 
zon, and he in turn has no knowledge of John 
Doe and his boots. Yet the one has been 
working to furnish the other with the article 
he requires, and both are parts of the intricate 
commercial and industrial system which enables 
us to live by satisfying each other's wants. 



CHAPTER VI 

IN A SHOE FACTORY 

Among whirling, jarring, and pounding ma- 
chinery, with the smell of leather in the air, a 
score of men are busy in the unchanging 
monotony of factory work. The windows look 
out on brick walls, crowding closely around, 
showing that it is in the heart of a city. Near 
at hand a workman places a side of heavy 
leather on a long table and selects from a shelf 
a great punch or die, shaped like the sole of 
a boot. Over the table is a beam steadily 
rising and falling with the motion of the ma- 
chinery. The die is placed on the leather, and 
as the beam descends it forces it through, 
seeming not to feel the resistance of the hard 
material. The workman dexterously shifts the 
33 



34 -^ Primer of Political Economy 

die over the surface of the leather, and every 
time the beam descends a boot-sole is punched 
out, until the hide, a skeleton hanging by 
slender threads, is thrown to the floor and 
another is placed on the table. The remnants 
of the hide are passed to a man standing before 
an up-ended log, resembling a butcher's block. 
He has a die the shape of a boot-heel, and all 
day long he swings his heavy mallet, cutting 
heel pieces from what remains of the heavy 
hides. The soles are carried in bundles to a 
boy who passes them through a noisy little 
machine that pares them down to the required 
thickness, and the heel pieces go to an energetic- 
looking machine that rushes them into a mould, 
and fastens them together roughly in the shape 
of finished heels. The scrappy remnants of 
the hides pass on to other workers, who select 
pieces suitable for various internal parts of 
boots and shoes. These pieces are passed 
through other machines which multiply them 



In a Shoe Factory 35 

by splitting, pare off their edges or otherwise 
shape them for their various uses. 

Thus a score of workers go on day after day, 
turning out soles, heels, and other heavy parts, 
in many forms and from many qualities of 
leather. Even the finest scraps and parings of 
leather are not wasted, for they go on to a 
grinding machine where they are reduced to 
powder. This is mixed with a gummy sub- 
stance and pressed into forms for filling between 
the soles, and for other parts not exposed to 
wear. 

On the floor above, the scene is entirely 
different. Among the busy workers there are 
more girls than men. The leather used is light 
and fine, for the flexible and ornamental parts 
of footwear. Some operators are working on 
canvas and other cloth fabrics. The workers 
sit in rows before long benches, dexterously 
cutting both leather and cloth according to 
peculiar shaped patterns, so queer and varied 



36 A Primer of Political Economy 

that it seems hard to believe they could 
ever be made to fit a human foot. There are 
some buzzing machines that pare down these 
lighter pieces of leather as they are rapidly 
passed through by trained fingers. These 
peculiar patterns in leather and cloth are tied 
in bundles and passed to the next floor above, 
where the noise of running machinery is much 
more persistent. ^The great room is crowded 
with girls seated in rows, before sewing- 
machines which seem to have grown into 
various distorted forms. Some of these ma- 
chines have two needles and sew a double 
seam. One has a needle that wobbles back 
and forth and makes a zigzag stitch, while 
another has a small knife that dances up and 
down beside the needle and trims the edge of 
the leather. A noisy machine has a small 
hammer that pounds down the edge as it is 
turned over. These machines seem to have 
twisted themselves into various forms, as me- 



hi a Shoe Factory 37 

chanics sometimes curl up to work in corners or 
other difficult places. 

One very intelligent-looking machine cuts a 
button-hole in the upper of a lady's shoe, 
throws out the piece, and runs around the edge 
with two needles, one above and one below, 
finishing it with close stitching over a strong 
border of twine. With this machine a girl can 
cut and sew five hundred button-holes in a day. 
On the top is a dial which registers the number 
of stitches it makes, and the owner pays the 
inventor for the privilege of using it according 
to the record of work done. Another machine 
sews on buttons, which are thrown carelessly 
into a hopper. Each plunge of the big needle 
sews on a button, and the needle comes down as 
fast as the seconds are ticked off on a watch. 
Eyelets are driven through and clinched by 
another machine that selects the little brass 
tubes, turns them the right way, and finishes 
them in the leather, so fast that the punching 



38 A Primer of Political Economy 

makes a noisy rattle. In this room the queer- 
shaped pieces arriving in bundles from the 
cutting-room are passed from hand to hand, and 
from machine to machine, till they finally 
emerge in the form of uppers ready for soling. 
These pass to the lasting-room, where the 
smell of wax and moist leather recalls the 
old-time shoemaker's shop. Here the soles, 
heels, and uppers are brought together and 
take form in the finished boot. The soles are 
passed through machines that trim and form 
them for the various shapes and sizes required, 
and groove and mitre the edges for sewing. 
The leather is softened by water, and soles 
and uppers are put together on wooden lasts, 
most of the work requiring the strong hands 
of men. A machine with many long deft 
fingers holds the edge of the upper down 
over the sole, while another machine nails 
the parts in position. The united parts are 
passed to other machines that sew the soles 



In a Shoe Factory 39 

and uppers together. When this is done 
inside out, a sturdy machine is used to turn 
them after the lasts are withdrawn. 

There are machines ^that sew the sole and 
upper together, that carry and sew on strips 
of leather, that nail on a heel with one stroke, 
and that drive pegs which are cut from wire 
fed in a coil. Some machines drive one and 
two rows of pegs or nails so fast that they 
cannot be counted. A workman stands 
before a sole-polishing machine with a lever 
in each hand, which he moves this way and 
that, the boot and polishing cylinder follow- 
ing his motions. In all parts of the room 
are frames or racks loaded with boots in 
various stages of the lasting process, and 
ready to be wheeled from one machine to 
another. The whirling cylinders that trim 
off the soles and heels resemble wood-work- 
ing machinery, and the workmen stand in a 
cloud of flying powder and small particles 



40 A Primer of Political EcoJtomy 

of leather like the sawdust in a lumber mill. 
These machines cut, trim, sandpaper, polish, 
burnish, and perform many other operations, 
each under the guidance of a separate work- 
man. Each machine and each operation 
has a distinguishing name, and so has each 
of the numerous parts that go to make 
up a finished boot. In the trimming and 
polishing of the ' edge of the sole, a boot 
passes through the hands of four workmen. 
The heel, after being nailed on, is cut into 
shape by whirling knives, ground by sand- 
paper on wheels, inked, burnished, polished, 
brushed, and subjected to various finishing 
processes before the revolving shafts, wheels, 
and brushes. After the nailing, which is 
done in strong, irresistible pressure, the heel 
receives the attention of six workmen. Some 
operate on a heel several times, with others 
alternating, so that it is passed from hand to 
hand fifteen times before it is finished. In 



In a Shoe Factory 41 

each operation a workman has so many boots 
passing through his hands that he learns to 
move with great speed and dexterity. Fully 
fifty of these workers have helped directly 
to make the boots bought by John Doe. 
Each has done his or her part to transform 
the various kinds of raw material into a shape 
serviceable to man, and the result of these 
concerted efforts is a pair of boots, to John 
both pleasing and serviceable. 



CHAPTER VIl 

THE LAW OF SUPPLY AND DEMAND 

We have seen but few of the many 
workers who have been busy in all parts of 
the world, preparing and shaping the material 
for John Doe's boots. Scores of other trades 
and occupations have done their part of the 
work. The machinery of the factories, the 
tools of the miners, the whaling ship and 
all its compHcated parts, the locomotive en- 
gine rushing across the continent, all have 
come into existence by the labor of many 
hands guided by many minds. Looking back 
still further, we find each of these workers 
requiring tools and material supplied by many 
others. The shoemaker requires leather from 
the currier, who requires hides from the tan- 
42 



The Law of Supply and Demand 43 

ner and oil from the refiner. The tanner 
obtains raw hides from the butcher, who ob- 
tains his cattle from the drover, his knife 
from the cutler, and his block from the lum- 
berman. The cutler depends on the iron 
founder for his blades, and on the dealer in 
horn or foreign woods for his handles. The 
iron founder requires coal from the miner, 
and thus every line of material can be traced 
back through an increasing number of indus- 
tries to the point where every worker drew 
his supplies directly from nature's great store- 
house, which economists call land. The term 
** land " is used to mean not only the sur- 
face of the ground, but all that is beneath 
or above it, the minerals and forests, the 
water and its wealth of living creatures; in 
short, all nature's free gifts to man. 

All the world's wealth is taken from this 
great storehouse by human labor, and will be 
returned to it again by the laws of nature. 



44 -^ Primer of Political Economy 

Some wealth returns to the land in a few 
days, some in a few months, a few years, or 
a few centuries. Workers in different parts 
of the world, knowing nothing of one another, 
were unconsciously co5perating toward the 
production of a pair of boots for John Doe, 
and yet they seemed to produce the right 
quantity of each line of material used. One 
would naturally suppose that there would be 
too much leather, not enough cloth, or some 
great error as to the amount of oil required 
for currying. If only one pair of boots were 
required, the regulation of the supply would 
be comparatively easy, but no one knows how 
many pairs of boots will be wanted, nor hov/ 
many other uses will be found for each line 
of material. 

This intricate problem of regulating the 
supplies solves itself without the interventiorr" 
of governmental authority. It is natural for 
men to seek the best rewarded occupations, 



The Law of Supply and Demand 45 

to satisfy their desires with the least exertion. 
In Canada it is possible to grow oranges 
under glass, but nobody does so, because it 
requires less labor to grow apples, sell them, 
and buy oranges with the money received. 
That is satisfying the desire for oranges with 
the least exertion. The same rule of conduct 
regulates the supply of all the material used 
in making John Doe's boots, and the supply 
of all other things required for human main- 
tenance or comfort. The owner of a great 
copper mine studies the requirements of the 
world in that particular line. He knows the 
output of all the important copper-producing 
districts, and the wants of the leading mar- 
kets. If his mine contains rich ore, he keeps 
on producing, even if an excessive supply 
causes a fall in price. But if he owns a 
««iine that barely pays the cost and risk of 
working, he cannot stand a fall in the price 
of copper. If there is more copper than is 



4^ A Primer of Political Economy 

required for the nails of John Doe's boots 
and other similar uses, the price of it is cer- 
tain to fall. The copper becomes available 
for coarser or cheaper uses. Copper nails are 
used in cheaper work than formerly, and it 
is the cheapest or marginal utility that deter- 
mines value. 

In Australia, when water is scarce and can 
be used only for drinking, it is valued accord- 
ing to that use. When it becomes more plen- 
tiful, and some can be used for washing, it 
is all valued according to that more extended 
use, whether required for washing or drink- 
ing. It is the same with copper and all 
other things bought and sold. If the mine- 
owner who is making small profit sees a pros- 
pect of too much copper, he knows the cost 
of mining will be greater than the price he 
will receive. He tells his workmen that they 
must work for lower wages or he will be 
obliged to stop mining. The workmen hear 



The Law of Supply and Demand 47 

that the whalers have great difficulty in get- 
ting crews to man their vessels, and are pay- 
ing high rates to all who will sign for a 
voyage. With the excess of copper for the 
nails has come a scarcity of oil for currying 
leather. More vessels have been taken for 
whaling, and there is a demand for men. The 
workers in the mine are not willing to accept 
lower wages than are offered in the seaports, 
so they leave the mine, and ship on the 
whalers. There is thus a reduction in the sup- 
ply of copper and an increase in the supply 
of oil, adjusting the quantity of each to the 
needs of the people. In this way the natural 
desire of man to adopt the most remunera- 
tive employment adjusts the supply of every 
line of goods to the demand. It is not nec- 
essary for all miners to leave for the whale 
fisheries to counteract an abundance of cop- 
per and a scarcity of oil. A few workers 
here and there, crowded out of the one occu- 



48 A Primer of Political Economy 

pation and tempted into the other are suffi- 
cient to restore the balance between supply 
and demand. If there should be an abun- 
dance of sole leather and a scarcity of upper 
leather, sole leather will be devoted to a 
wider range of uses, and the fall in price will 
make its production less profitable. The tan- 
ner will find it m6re to his advantage to in- 
crease the output of the scarcer kind of 
leather, and by thus following the natural 
rule of human conduct, he will adjust the 
balance of supply and demand. 

Tanners and other manufacturers do not 
wait for a change in prices to determine which 
lines they will restrict and which they will 
increase. They watch the market closely and 
study the course of every change likely to affect 
the price of their wares and their material. 
By attention and judgment they are able to 
anticipate many of the influences that would 
tend toward a change in prices, and counteract 



The Law of Stipply and Demand 49 

them by varying the supply, thus preventing 
the changes from taking place. The Gaucho 
of the southern plains finds no demand for his 
services as a herdsman, but an opening for 
renumerative work in the wheat fields. He 
does not know the reason, but following the 
natural impulse, he leaves the saddle and 
takes to the seed-drill and reaping-machine. 
The cause may be found in the British food 
market, where the prospect of a shortage of . 
wheat has induced speculators to promise to 
buy it at a high price on a future date. This 
has stimulated wheat-growing. At the same 
time the prospect of an abundance of beef has 
tended to discourage the herdsmen. The 
young Gaucho on the plains, by turning from 
one occupation to another, has unconsciously 
done his share to restore the balance, to pro- 
duce that which was scarce and lessen the 
supply of that which was abundant. This 
shows the working of the law of supply and 



50 A Primer of Political Economy 

demand, a natural law which enables the pro- 
ductive workers in all parts of the world to 
contribute toward a unity of results, unknown 
to one another, and without even knowing the 
results toward which they are aiming. Every 
excess of goods is checked, and every shortage 
made good, by the natural tendency of man to 
seek the most productive lines of industry, to 
satisfy desires with the least possible exertion. 



CHAPTER VIII 

TAXATION 

When John Doe pays for the boots, he is 
paying taxes, although, if he has never studied 
economics, he may be entirely ignorant of the 
fact. The merchant is required to pay taxes 
to the city treasury to be expended in keep- 
ing a fire-protection service, a police force, 
parks for recreation, schools, and many other 
things for public use or convenience. These 
taxes are levied according to the value of the 
store and the value of the stock which includes 
the pair of boots. The merchant is obliged to 
pay this out of the profit on the boots, and as 
that is increased to the extent of the tax by an 
increase in the price, John Doe is really paying 
a share of the merchant's taxes. Every other 
51 



52 A Primer of Political Economy 

merchant has to pay a similar tax to the city, 
so none could afford to sell at a lower price. 
Wherever John Doe may go to buy his boots 
he will be forced by the price demanded to 
make a contribution to the city's treasury. 
The city authorities have other methods of 
levying on him. The merchant requires a ser- 
vice of city water in his store, and for that he 
is in some cases charged more than it costs. 
The profit goes to the city treasury, and is in 
reality a tax levied on the merchant. That is 
also shifted on to John Doe's shoulders by the 
necessity of charging a still higher price for 
the boots. The carter who carries the boots 
from the freight shed at the railway station in 
his ponderous wagon is obliged to pay a license 
fee to the city. That fee, though small, is 
added to the charge for carting the boots, and 
all other things moved by licensed carters, the 
license being part of a scheme for establish- 
ing a regular charge for such services. It 



Taxation 53 

increases the cost of the boots to the merchant, 
and is finally paid by John Doe in the price 
asked by the clerk behind the counter. The 
company supplying electric light to the store 
is obliged to pay a large sum to the city for 
the franchise or privilege to go into business. 
The understanding is that the company will 
recoup itself in its charges, and the merchant 
who sells the boots is compelled to pay propor- 
tionately for his light. That charge, as a part 
of his expenses, is added to the price of the 
boots, and the city authorities, by levying on 
the electric light company, compel John Doe 
to pay still another tax. The public services 
for which these taxes are levied are really 
rendered to John Doe in common with others 
who live or do business in the city. 

There is one tax levied by the city on the 
merchant's premises, which does not increase 
the price of the boots, and that is the tax on 
the land on which the store stands. It may 



54 ^ Primer of Political Economy 

seem peculiar that while a tax on boots, 
houses, electric Hghts, and all products of 
labor makes them dearer, a tax on land 
makes it cheaper. Richard Roe, who owns 
the land on which the store stands, is charg- 
ing the merchant a regular rent for the privi- 
lege of maintaining the store there. The 
amount he can charge depends entirely on 
the location and its surroundings, as these 
affect the chances of doing business. In a 
small village the amount would be proportion- 
ately small, and to avoid the bother of paying, 
the merchant would probably buy the loca- 
tion. If the village grew to a town, the 
owner of a lot on the business street would 
find himself able to secure a much larger 
revenue from a merchant or manufacturer 
wanting to build a store or factory on it. 
And if the town should grow to a city, the 
same owner, though he might have lived in 
a distant country, would find himself wealthy. 



Taxation 5 5 

He could secure a large income by merely 
allowing some merchant to build or maintain 
a store on his lot. In Toronto there are 
small patches of land for which the owners 
obtain as high as ^100 a foot frontage 
every year, and in New York and London 
the land rents are far higher. Land has 
sold in Toronto at the rate of ;? 1,2 50, 000 
per acre, in New York at $15,000,000 per 
acre, and in London sales have been effected 
at ;^20,ooo,ooo per acre. The city levies a 
tax on land, but that does not enable the 
owner to charge any more for it. A tax on 
boots enables the owners to increase their 
prices, not merely because they want to do 
so, but because the tax makes boots more 
difficult to obtain. It increases the cost of 
producing boots, makes them scarce, lessens 
the supply, restricts their use, and in conse- 
quence makes them dearer. A tax on land 
cannot lessen the supply, because that is fixed 



56 A Primer of Political Economy 

by nature, but it increases the available sup- 
ply by making the holders of vacant land 
more anxious to offer it for sale. However 
eager a landowner may be to increase his 
rent when the city increases his taxes, he can- 
not do so, as the taxes cause other owners to 
offer land on more reasonable terms. Rich- 
ard Roe is getting, say, $2000 a year ground 
rent from the merchant who owns the store 
where John Doe bought the boots. The city 
might take one-half, three-quarters, or even 
the whole of this amount in taxation every 
year, and Richard would not be able to 
charge the merchant any more, neither would 
the merchant be able to charge any more for 
his boots. The rental of the ground is gen- 
erally fixed for a term of years, but even 
when bargaining for a renewal of the lease 
the tax would not enable Richard Roe to ob- 
tain an advance. The rent he can charge 
depends on the value of the site for business 



Taxation 57 

purposes, and no matter how much of it the 
city takes, he cannot obtain any more. If he 
were getting ;^2000 a year, he would probably 
sell his lot, if so disposed, for 1^40,000. The 
value of land is always estimated from the 
income present and prospective, and, at 5 per 
cent per annum, a lot yielding ;?2000 a year 
would be worth ^40,000. If the city took 
half the income in taxation, leaving him only 
;^iooo a year, he would be willing to sell his 
lot for ^20,000. If three-quarters of the 
income were taken by the city, leaving him 
only ^500, he would be willing to sell out for 
;^io,ooo; and if the city took the whole 
income, the lot would have no selling value. 
That is another explanation of the way in 
which the taxation of land makes it cheaper. 
The land tax must remain a matter be- 
tween Richard Roe and the city, and cannot 
affect the price of John Doe's boots. If the 
land on which the store stands belongs to the 



58 A Primer of Political Economy 

merchant himself, whom we will call Henry 
Foe, the same principles operate. Henry Foe 
obtains the full advantage of his good location, 
but instead of handing the value of it over 
every year to Richard Roe, keeps it himself. 
The city may take this rental value, or any 
part of it, from him in taxation, and he will 
be no more able to advance his prices than 
if he paid it to Richard Roe, or retained it 
himself. The only effect of the tax is to 
alter the destination of his money. 

John Doe has borne many city taxations 
although he is not a resident of the city, and 
he has to pay the taxes levied by his own 
township, and spent in making roads, build- 
ing bridges, maintaining schools, and support- 
ing the township and county councils. But 
in the mutual relations between the city and 
the country, these apparent injustices in taxa- 
tion are adjusted. If John Doe must buy 
boots subject to city taxation, the people of 



Taxation 59 

the city must buy produce from the country. 
The tax on the boots, like every other addi- 
tion to the cost of a farmer's purchases, has 
a tendency to increase the price of farm prod- 
uce sold in the city. The competition in 
every line of industry thus tends to confine 
the burden of every tax to the district over 
which it is levied. Although it cannot be 
asserted as an absolute rule, it is generally 
true that the people of each municipality, 
each province, state, or nation, must bear their 
own taxation, however ingenious may be their 
efforts to shift it onto outsiders. 

But we have not yet reached the end of 
John Doe's taxation bill in regard to the 
boots. He must pay to the state for the 
maintenance of the civil courts, the care of 
the blind, the deaf-mutes, and the insane, as 
well as for the general administration of state 
or provincial affairs. The merchant is not 
willing to take the risk of a fire destroying 



6o A Primer of Political Economy 

his stock, so he has it insured, the premium 
charged by the company being estimated as a 
part of his expenses. It must be met from 
the profits obtained on his sales, and is in 
consequence one of the items that go to 
make up the price of the boots bought by 
John Doe. The state imposes a tax on the 
insurance company, and in that way John 
Doe pays a part of it, which reaches the pro- 
vincial or state treasury through the mer- 
chant and insurance company. In the course 
of business the merchant requires an occa- 
sional advance of money from the bank, and 
the charge for such accommodation is also re- 
garded as a part of his running expenses. It 
is enhanced by the state tax on banks, which 
is in the same way paid by John Doe in 
common with the merchant's other customers. 
National taxes are numerous. The canvas 
used for lining the boots is taxed by a cus- 
toms officer when brought into the country, 



Taxation 6 1 

and its price to the manufacturer is propor- 
tionately increased. This increase, with an 
added profit on it, is paid by the merchant, 
and finally, with another profit, by John Doe. 
The nails in the boots are taxed the same 
way, the tax being finally shifted to John 
Doe. The thread with which the boots are 
sewn and the wax used on the thread are 
also taxed in the same way by the national 
authorities, and John Doe is made to contrib- 
ute the combined amount. The leather has 
been subjected to import taxation and its 
price consequently increased, the amount of 
the increase also appearing in the final price 
of the boots. The India rubber, the many 
component parts, as well as the machinery 
used in the various processes of manufacture, 
are, with few exceptions, subjected to taxa- 
tion, which is finally contributed with added 
profits by John Doe. 

The finished boots have not been subjected 



62 A Primer of Political Economy 

to import taxation, for they have been manu- 
factured in the country. Federal taxation is 
levied on such things when they enter from 
other countries. But the manufacturer is en- 
abled to recoup himself, for the accumulated 
load of taxation which he has paid, by the 
tariff, which prevents John Doe or any mer- 
chant with whom he deals from importing 
boots from other countries. The tariff imposes 
a tax on imported boots of about one-third 
their value, so it pays John Doe better to buy 
the products of local manufacture, and pay 
not only the accumulated taxations on the ma- 
terial, but an additional amount which the 
manufacturer is enabled to obtain. The tax on 
imported boots enables the manufacturer of 
boots to advance his prices to the level of the 
cost of foreign-made boots with the duty added. 
That enhances the price John Doe and all 
other boot-buyers must pay, and the system is 
continued to encourage the local manufacture 



Taxation 63 

of boots. Those who favor it think that the 
advantage of having boot and shoe factories in 
active operation within the taxation area more 
than compensates for the extra price paid. 
Opponents of the system contend that the loss 
must always be greater than the gain, and that 
with freedom to buy in the cheapest markets, 
the most profitable industries only would be 
established — their products being exported to 
pay for other things required. People can 
obtain boots by manufacturing them, or by 
making or producing some other article to give 
in exchange for them. When free from legal 
obstructions they will adopt the method which 
gives the boots required with the least expendi- 
ture of labor. 



CHAPTER IX 

JOHN MUST PAY FOR THE BOOTS 

We have now reached the most difficult part 
of this compHcated transaction. We have seen 
how people in every quarter of the globe, 
unknown to one another, did their part in the 
many processes necessary to the making of a 
pair of boots for John Doe. It is now neces- 
sary that John should pay each and every one 
of them for the services they have rendered 
him. His own contribution to the wealth of 
the world is made by growing wheat, but it 
would be impossible for him to send his wheat 
all over the world to pay every one who has 
helped to make the boots. And even if it 
were possible, many of them would not want 
the wheat, and would not be willing to give 
64 



John must pay for the Boots 65 

anything or render any service for it. But 
John must pay every one of them, and pay 
them by growing, reaping, and threshing wheat. 
He must pay the Brazilian who cut his way 
through the jungle by the Amazon, the Gaucho 
who galloped through the night after the stam- 
peded herd, the men who suffered the torture 
of the alkali works, the miners who drilled 
deep shafts in the mineral-laden mountains, and 
the smelters who sweltered in the glare of the 
furnaces, the whale fishers, tanners, curriers, 
and busy workers in the factory, even to the 
clerk who parcelled up the boots and handed 
them over the counter. Under primitive con- 
ditions every man made the things he required 
from the material supplied by nature. Every 
process was necessarily slow and laborious, and 
continuous work supplied only a few necessi- 
ties. But men found that greater results could 
be accomplished by confining their efforts to 
the making of special classes of goods and ex- 



66 A Primer of Political Economy 

changing to secure the variety of things needed 
in daily life. With the Esquimaux and unciv- 
ilized Indians each is his own shoemaker, 
weaver, boat-builder, tool-maker, tailor, hunter, 
and fisher. In a more advanced stage we find 
a weaver, a tailor, and a shoemaker located in 
a farming district. These men do not plant 
wheat and vegetables, but devote all their time 
to their special trades, thus acquiring a skill 
and deftness that greatly increase the product 
of their labor. The farmers and gardeners also 
confine their attention to their own lines of 
work. They give grain and vegetables to the 
weaver, and in return he spins their yarn into 
cloth. They give food products to the shoe- 
maker, and in return he gives them shoes, also 
to the tailor who makes their webs of cloth 
into clothing. By each producing one kind of 
goods and exchanging with the others, all ob- 
tain vastly more than under primitive condi- 
tions in which each did everything for himself. 



John must pay for the Boots 6y 

The farmer, weaver, tailor, and shoemaker 
illustrate a rudimentary separation of trades. 
The principle can be followed till there are 
an infinite number of distinct occupations, till 
one man no longer makes a boot but only puts 
on a heel or smooths off a sole, till the weaver 
no longer operates his loom but attends to 
some piece of machinery in a great factory, till 
the farmer no longer cards and spins wool 
into yarn but turns the fleece over to the fac- 
tory, where it passes through many hands, 
each trained to dexterity in one operation, be- 
fore it becomes yarn for weaving. 

In the separating of trades and the exchang- 
ing of products a difficulty soon develops. 
Suppose a tailor wants a pair of shoes. He 
applies to the shoemaker, who may not want 
clothes. If the shoemaker wants wheat, the 
tailor cannot get the shoes he wants unless he 
can find a farmer wanting clothes and willing 
to give wheat for them. The tailor can then 



68 A Primer of Political Economy 

exchange clothes for wheat, take the wheat to 
the shoemaker, and obtain the boots he wants. 
In city newspapers we often see advertisements 
for barter. Some one will want to trade a 
bicycle for a sail-boat, or a shot-gun for a sew- 
ing-machine. It is always rare and difficult 
to find anyone having the thing desired and 
wanting to exchange it for the thing to be 
parted with. This difficulty is overcome by 
trading in some article universally desired. 
The tailor wanting shoes does not seek a 
shoemaker wanting clothes. He trades the 
clothes for some article that every one wants, 
and takes it to the shoemaker, the gardener, 
the boat-builder, the gun-maker, and every one 
else who produces anything he wants. The 
shoemaker trades his shoes, not for the par- 
ticular things he wants, but for something 
every one wants. With this article, in univer- 
sal demand, he can secure all the purchasable 
things he requires. The farmer, too, trades 



John must pay for the Boots 69 

his wheat for something in universal demand, 
and for that he obtains the shoes, clothing, 
and furniture, the houses, pictures, books, and 
other things needed for his maintenance or 
comfort. The man who wishes to trade a 
shot-gun for a sewing-machine will generally 
find it to his advantage to trade his shot-gun 
for some article in general demand, which he 
can trade at any time for a sewing-machine. 
The unity of thought or impulse that leads 
people to fix their desires on some few articles 
makes such trading possible. These articles 
are generally personal adornments. 

With the Indians of the Great Lake regions 
it was wampum, a ringlike bead made from a 
shell found on the Gulf of Mexico. These 
shells were carried to the northern country, 
cut into strips by slow labor with primitive 
appliances, then cut into squares, drilled, and 
rounded. Such beads were highly prized as 
personal adornments, and the Indian who had 



70 A Primer of Political Economy 

a belt covered with them was indeed dis- 
tinguished. Indians would trade any article 
of value they did not need, for wampum, and 
with that they could buy whatever their tribes- 
men had to sell. With more civilized tribes 
and races gold and silver were used for the 
same purpose, and the general desire for these 
metals makes them available for a similar 
commercial use at the present day. When a 
tailor wants shoes he does not search for a 
shoemaker wanting clothes, but he trades the 
clothes he makes, with any one who will give 
gold or silver for them, knowing that any 
shoemaker will be glad to give him shoes 
for the precious metals. The farmer, too, 
trades his wheat for gold and silver, and for 
these metals he obtains the clothing, tools, 
books, pictures, and furniture, the building 
material, the services of carpenters, harvesters, 
and laborers, everything available that he de- 
sires. All other producers trade in the same 



John must pay for the Boots yi 

way, giving their products for gold and silver, 
and then giving those metals in return for the 
things desired. 

Using the precious metals in that way, men 
soon saw the inconvenience of weighing them 
and testing their purity. To obviate those 
difficulties, the precious metals were stamped 
or coined into pieces of a uniform weight and 
a uniform degree of purity. Governments, in 
coining gold or silver, testify to the weight 
and purity of each piece, thus saving people 
the trouble of weighing and analyzing for 
themselves. In remote mining regions the 
gold still circulates occasionally in a rough 
state, each merchant weighing for himself, 
but coining or the use of coins is universal 
with civilized countries. Other metals are 
always mixed with gold and silver to harden 
the coins and prevent loss by wear, but the 
exact proportion of such cheaper metal is always 
known. 



CHAPTER X 

COINS AND CURRENCY 

When John Doe paid for the boots he did 
not give coin but a five-dollar note issued to 
the First National Bank of New York by the 
National Government. On the note it was set 
forth : " The First National Bank of New 
York will pay the bearer on demand Five 
Dollars." That promise was further guaranteed 
as follows : " This note is secured by bonds 
of the United States, deposited with the United 
States Treasury at Washington." John received 
in change a silver certificate bearing the inscrip- 
tion : " This certifies that there has been 
deposited in the Treasury of the United States 
One Silver Dollar," and also: "One Silver 
Dollar payable to bearer on demand." He also 
received a silver coin stamped: "Quarter 
Dollar." Instead of the silver certificate he 
72 



Coins and Currency 73 

might have received a treasury note of the 
United States payable in coin, which might 
mean gold or silver ; or a greenback, so called 
on account of the color of the design on the 
back of the first notes issued after the outbreak 
of the war. The dollar of his change might have 
been paid in a big silver coin of that designation. 

All this seems very complicated and in no 
way connected with the exchange of goods for 
gold weighed on delicate scales, or even with the 
exchange of goods for coined gold, but the same 
principle underlies the use of money in any form. 
The simplest use of money is the trading of 
goods for wampum or gold dust. From that the 
progress is easy and natural to a system under 
which the precious metals are made into coins of 
uniform recognized weights. The next step is 
to a paper currency based on one of the precious 
metals, a system in use in Canada, and as it is 
extremely simple it should be investigated first. 

In Canada John Doe would have traded his 



74 ^ Printer of Political Economy 

wheat for a number of crisp notes, each setting 
forth that the Canadian Bank of Commerce 
would pay to bearer on demand five dollars. 
One of these he would have given to the mer- 
chant for the boots, and he would have received 
in change a note bearing the inscription : " The 
Dominion of Canada will pay the bearer on 
demand One Dollar." The silver coin received 
would bear no promise of payment, the inscrip- 
tion merely designating it as twenty-five cents. 
It may be well to begin an inquiry into this pecu- 
liar exchange of printed promises, by explaining 
what is meant by the term "dollar." It was 
originally the popular name for a large silver 
coin, but in this connection it is a standard of 
weight used by the Government in weighing 
gold for coinage, as the carat is used by 
jewellers in weighing diamonds, the ton by 
merchants in weighing coal, and the drachm 
by chemists in weighing drugs. It is equal to 
23.22 grains, so that when the Bank of Com- 



Coins and Currency 75 

merce agrees to pay the bearer on demand five 
dollars it agrees in reality to pay him 116.1 
grains of gold. When the Dominion of Canada, 
in reality the Government representing the 
people of the Dominion, agrees to pay one 
dollar, it agrees to pay 23,22 grains of gold. 
If John Doe had wanted to get the gold in 
place of the boots, he would have taken the 
five-dollar note to the bank and obtained an 
American five-dollar coin called a half eagle. 
This would contain 11 6.1 grains of the precious 
metal. The notes are issued of the same 
denominations as the coins, to make payments 
easy. With the gold coin in five-dollar and ten- 
dollar pieces it would be impossible to pay a 
note for four and three-quarter dollars, or any 
other fractional amount. The bank would be 
under no obligation to pay gold, notwithstand- 
ing the direct promise printed on its note. The 
Canadian law makes the notes issued by the 
Dominion Government, one of which John Doe 



76 A Primer of Political Economy 

receives in change, a legal tender, that is a 
legal substitute for gold. If John Doe went to 
the Bank of Commerce to get the gold accord- 
ing to the promise on the note, the clerk could 
legally refuse to give it to him, and could 
redeem the note or discharge the obligation by 
giving him five one-dollar notes. John would 
be obliged by law to accept these in payment of 
his demand, but he could take them to the 
office of the Deputy Receiver General, a gov- 
ernment official, and obtain in the form of a 
coin the gold promised on the face of them. 
The law making these Dominion notes a legal 
tender compels all creditors to accept them in 
payment of debts, but it is because the Deputy 
Receiver General is ready at all times to 
redeem them in gold that people are willing to 
receive them in payment for goods. No man 
would give his wheat, his boots, or his clothing 
for these printed promises, were it not that the 
Government stands ready to redeem them in 



Coins and Currejtcy yj 

gold. This is made clear by a study of the 
nature of paper currency. 

When John Doe sells his wheat he does not 
want to carry gold about with him to buy the 
things he wants, provided he can be safely 
assured of getting it when he wants it. The 
buyer of his grain might give a written promise 
to pay him at any time or to pay anyone else 
but John would not have sufficient confidence 
to trust him. John wants a promise that he 
will consider as good as the gold, and that 
other people will have equal faith in, and will 
be willing to accept instead of gold. The 
printed promise of the Bank of Commerce to 
pay gold on demand is just what he wants. 
When he holds such promises rolled up in his 
pocket, he knows he can get the gold for them 
at any time. If he gave one at the store, the 
merchant would unhesitatingly hand him the 
pair of boots he wanted, and give him some 
change also. He knows every one will be 



'jS A Primer of Political Economy 

eager to obtain such printed promises, and wil- 
ling to give goods for them. 

Why is there so much confidence in the Bank 
of Commerce ? Why is there the same con- 
fidence in the printed promises of all Canadian 
banks ; for it is but one of several ? Take 
one of these bills into the United States, away 
from the boundary cities, and merchants will 
refuse to give goods for it. But the people 
of Canada have faith in the banks because 
their financial condition is investigated by the 
Government. The banks are obliged to pub- 
lish a statement every month, telling how 
much they owe and how much is owed them, 
how many of these printed promises are out- 
standing, how much gold and how many gov- 
ernment notes they have to meet such prom- 
ises, and all things of importance regarding 
their financial standing. It is also a provi- 
sion of the law that a bank cannot be in- 
corporated with less than 1^250,000 in gold 



Coins and Currency 79 

or its equivalent. If John Doe refers to any of 
these bank statements he will find that no bank 
has sufficient gold and Dominion notes to meet 
all its outstanding promises to pay on demand. 
If all a bank's notes were brought at once and 
payment demanded, it would not be able to 
meet the demand, and would be obliged to 
suspend business till it could turn some of its 
other assets into money. But that fact does 
not cause John the least uneasiness. He 
knows that though his house and barns cannot 
resist a cyclone, they can resist the severest 
stress of ordinary weather, and he feels secure. 
In the same way he knows that though the 
bank cannot meet an extraordinary demand 
from all note holders at once it can meet the 
strongest demand that will occur in the ordinary 
course of business. He knows that although 
the bank cannot pay all note holders at once, 
it can pay him at any time should he want the 
gold, and that is all the assurance he requires. 



8o A Primer of Political Economy 

Thus the printed promises or notes of the 
banks, in greater volume than the gold these 
institutions possess, pass freely from hand to 
hand and are accepted as readily as the gold 
itself, even though they are not legal tender 
and not guaranteed by the Government. It is 
an advantage for any corporation thus to aug- 
ment its store of money, and be able to use its 
credit as well as its gold. The Dominion Gov- 
ernment pursues that advantageous policy, as 
well as the banks. It issues notes to a greater 
amount than it holds gold to redeem them. To 
prevent these notes from returning to the Re- 
ceiver General for redemption, the Government 
compels the banks to keep forty per cent of 
the reserves they hold for safety, in Dominion 
notes. When a bank is preparing its monthly 
statement, if it finds that it has less than the 
requisite proportion of Dominion notes, it is 
obliged to buy them with gold from a Deputy 
Receiver General. That helps to keep the 



Coins and Currency 8 1 

Dominion's promises or notes from returning for 
redemption, as does also the provision restrain- 
ing the banks from issuing notes of smaller 
denominations than five dollars. The people 
continually require the Dominion Government's 
ones, twos, and fours for making change. 

John Doe when parting with his wheat would 
receive a printed promise that the Bank of 
Commerce would pay him or the bearer on 
demand, five dollars, meaning 116.1 grains of 
gold. He would give that promise to the mer- 
chant and obtain the pair of boots he wanted. 
To make up the difference in value, the mer- 
chant would give him a printed promise that 
the Dominion would pay the holder of it on 
demand, one dollar, and also a silver coin 
stamped " Twenty-five Cents." The twenty- 
five-cent coin would contain 83.25 grains of sil- 
ver and some alloy to harden it. At the time 
when that weight of silver was chosen, it was 
about the same value as quarter of a gold dollar 



82 A Primer of Political Economy 

of 23.22 grains.* The object was to have the 
gold coin and the silver coin of the same value. 
The maintenance of that parity was of course 
impossible, values being subject to continual 
change through the law of supply and demand 
or marginal utility. To avoid the confusion of 
having gold and silver dollars of different 
values, the silver coins are issued only in 
limited numbers and are legal money only to 
the extent of ten dollars. A man entitled to 
receive more than ten dollars need not accept 
silver for the balance in excess of that sum. 
In small amounts silver coins are accepted as a 
matter of convenience. For still smaller 
change there is a bronze coin stamped " One 
Cent." The metal in this coin, although valu- 
able, is not worth the hundredth part of a dol- 
lar, for which it is accepted, but it passes freely 
from hand to hand. These coins are legal 
tender to the extent of twenty cents. 

* The metal in American silver coins, previous to 1853, was ap- 
proximately equal in value to gold coinage, Canadian silver coins 
have always been tokens, limited in issue and use. 



CHAPTER XI 

NATIONAL BANKS, GOLD AND SILVER 

When John Doe parted with his wheat for 
national bank notes he did not receive gold 
but the security of the United States that the 
metal would be delivered, a security given 
through the bonds mentioned on the national 
bank note. A bond when issued by the Gov- 
ernment is a printed acknowledgment that the 
whole people, through their government, are 
in debt to the holder of it, and that they will 
pay him interest during the currency of the 
debt, and the principal when it falls due. 
When a government becomes unable to meet 
its expenses, through the cost of a war or any 
other outlay above income or revenue, the 
favorite method of borrowing is to issue bonds. 
83 



84 A Primer of Political Economy 

These bonds are sold, and as they are merely 
the promissory notes of the Government, the 
buyers are in reality lending money to the 
Government, or the whole people, on notes. 
These notes or bonds are excellent security, 
and are made to serve as an assurance, by the 
national banks, that such notes as John Doe 
receives for his wheat and pays for the boots 
will be redeemed on demand. If a few men 
want to start a national bank they must have 
from $50,000 to J^200,ooo according to the 
population of the town or city in which they 
intend to locate, the smaller amount being 
accepted in towns of less than six thousand 
inhabitants. They must buy government bonds 
with one-fourth of their capital if it is under 
;^i 50,000, and to the extent of at least $50,000 
if their capital is greater than $150,000. These 
bonds must be deposited in the United States 
Treasury, and for purposes of circulation the 
Government issues to the owners, when incor- 



National Ba7iks, Gold and Silver 85 

porated as a bank, such notes as were received 
by John Doe for his wheat, to the extent of 
ninety per cent of the value of the bonds. 
Thus the Government holds the bonds it has 
issued, but which belong to the newly formed 
bank that has bought them. In return the 
bank has circulating notes which it loans or 
otherwise uses, and which the Government is 
under obHgation to redeem. When John Doe 
parts with his wheat for these notes he knows 
he can go to the bank and get the promised 
gold, or the government notes which will 
enable him to get it. 

The national banks are required to report 
their financial condition to the Government, 
and the report of the First National Bank is 
an assurance of its ability to pay John Doe on 
demand. But even if it should fail, its bonds 
are with the Government as security and will 
be forfeited to pay note holders. There is, in 
addition, a deposit with the Government of five 



86 A Primer of Political Economy 

per cent of the notes outstanding against each 
bank. People holding national bank notes 
can have them redeemed in gold by presenting 
them at the treasury in sums of $1000 or any 
multiple thereof. These notes, when thus re- 
deemed by the Government, are charged against 
the banks issuing them, and when the notes 
held against any single bank amount to ^500 
that bank must buy them back and pay for 
them in Government notes. National bank 
notes are accepted by the Government in pay- 
ment of excise and all taxes and dues to the 
United States except the duty on imports. 
They are also legal tender for all debts due by 
the Government to individuals, except interest 
on the public debt and the redemption of gov- 
ernment notes. 

The silver certificate which John obtains in 
change is a more complicated affair. It sets 
forth that a silver dollar has been deposited in 
the Treasury of the United States and is pay- 



National Banks^ Gold and Silver 87 

able to bearer on demand. It has been stated 
that a dollar is 23.22 grains, but that weight of 
silver would be far less valuable than the same 
weight of gold. The yellow metal, as we have 
seen, is coined into dollars, or rather into eagles 
and half eagles to save people the trouble of 
weighing it themselves. But when it is at- 
tempted to coin silver for the same purpose 
it is desirable that the gold and silver coins 
should be, not of the same weight, but of the 
same value. With that end in view the silver 
dollar is made heavier than the gold dollar in 
the same proportion that silver is less valuable 
than gold. The last coinage ratio adopted for 
the purpose of equalizing the value of the 
dollars was sixteen to one. Because gold was 
generally sixteen times more valuable than 
silver, the silver dollar was made sixteen times 
as heavy as the dollar of gold. As the value of 
all metals must vary by the pressure of supply 
and demand, this value ratio must be constantly 



8S A Primer of Political Economy 

changing. Herodotus states that in the year 
340 B.C. the value ratio of gold to silver was 
thirteen to one. In Rome it was nine to one in 
the year 60 b.c. Though the coinage or weight 
ratio may be fixed as closely as possible to the 
value ratio, the fluctuations of the latter will 
make the gold or the silver dollar occasionally 
more valuable. John Doe's silver certificate 
entitles him to 371.25 grains of that metal, 
which, in the fluctuation of values, may one day 
be worth more and the next day less than 23.22 
grains of gold. When the silver is worth less 
than the gold, John will be inclined to pay his 
debts in silver dollars, or in certificates entitling 
the holder to silver dollars. Every one else 
will show a similar inclination, and the gold 
money will disappear. It will be found more 
profitable to take it to other countries where 
the coinage ratio or system is different, or to 
make use of it in the arts. When the gold 
coin is worth less than the silver, the inclina- 



National BankSy Gold and Silver 89 

tion will be in the opposite direction, hence the 
less valuable coins always drive the more valu- 
able out of circulation. 

In 1792 Congress decided to coin both gold 
and silver dollars at a weight ratio of fifteen' 
to one, that being as near an estimate as 
could be made of the value ratio. It was 
believed that gold was fifteen times as valu- 
able as silver. So the silver dollar was made 
to weigh fifteen times as much as the dollar 
of gold. The weight of the gold dollar was 
24.75 grains, not counting the cheaper metal 
added to harden it, and the silver dollar con- 
tained 371.25 grains, just fifteen times as 
much metal. But gold was worth a little 
more than fifteen times as much as silver, so 
the coin containing 24.75 grains of it was 
more valuable than the 371.25 grains of the 
white metal. Under the circumstances the 
people would naturally use their silver to 
make dollars for commerce, sending their 



90 A Primer of Political Economy 

gold elsewhere. The gold dollars coined 
were bought by English goldsmiths. But the 
people had still less valuable dollars in the 
clipped, punched, and worn foreign coins, so 
they saved both their gold and silver for 
other purposes. A few silver dollars were 
coined in 1830. 

In 1834 Congress attempted to aid the 
gold-mining industry by changing the coin- 
age ratio to sixteen to one. The silver dol- 
lar was left at 371.25 grains, although the 
alloy was slightly changed, but the weight of 
pure metal in the gold dollar was reduced to 
23.22 grains. At its former weight the gold 
dollar was worth more than the silver dollar. 
But the change was greater than the differ- 
ence in value, and it made the gold dollar, 
not equal to, but less than the silver, in 
value. As a consequence only a few silver 
dollars were coined, and they were too valu- 
able to be used as money. Gold became the 



National Banks ^ Gold and Silver 91 

money of the country, because it was less 
valuable than silver at the weight adopted, 
and when in 1873 Congress abolished the 
free coinage of silver for the owners of that 
metal, it excited no general interest, silver 
being too valuable to be used for that pur- 
pose. Shortly afterwards the relative value 
of the metals approached and passed the 
coinage ratio. By a fall in the value of sil- 
ver, an increase in the value of gold, or both 
changes acting together, gold became sixteen 
times, and more than sixteen times as valu- 
able as silver. Silver miners then complained 
that they could not have 371.25 grains of 
their metal coined into a dollar as before. 

Congress decided in 1878 as a measure of 
compensation, to buy sufficient silver at the 
market price to coin $ 2,000,000 a month. The 
silver bought under that act was sufficient to 
coin 378,166,795 dollars but the metal had so 
fallen in value that it cost only 303,190,262 



92 A Primer of Political Economy 

gold dollars. The silver certificate received 
by John Doe in change was put in circula- 
tion by the Government in paying for this 
silver. In 1890 Congress enacted that 4,500,- 
000 ounces of silver be purchased every 
month, with a requirement regarding coin- 
age into dollars for the redemption of legal- 
tender notes to be issued. Under that law, 
which was repealed in 1893, the Government 
purchased 168,674,682 ounces of silver for 
^I55)93i>002, which were gold or virtually 
promises to pay gold. These purchases tended 
to compensate silver producers for the loss of 
the privilege of having their metal coined 
into dollars. 

For his dollar of change John Doe might 
receive a greenback which would entitle him 
to 23.22 grains of gold, a treasury note prom.- 
ising him one dollar in coin, which might 
be 23.22 grains of gold or 371.25 grains of 
silver, a big silver dollar which would con- 



National BankSy Gold and Silver 93 

tain 371.25 grains of that metal, or a silver 
certificate promising him the silver dollar on 
demand. Although 23.22 grains of gold are 
worth more than 371.25 grains of silver, he 
would accept these notes or promises as if 
they were of equal value, not ai: the average 
value of the two, but at the value of the 
gold coin. He would do so because the 
Government, to avoid having dollars of un- 
equal value, has promised to redeem all the 
notes in the gold coins. Although the holder 
of a treasury note has a promise of coin 
only, the Government will not avail itself of 
its right to pay him with the less valuable 
metal, but will give him the gold if he asks 
for it. The holder of a silver certificate, too, 
though entitled to only a silver dollar, can 
obtain a gold dollar on demand. And the 
big silver dollar itself is accepted by the 
Government, consequently it can be exchanged 
for the 23.22 grains of gold. The quarter 



94 A Primer of Political Economy 

dollar is a subsidiary coin, on the same prin- 
ciple as the Canadian quarter dollar described 
in the previous chapter. 

There are also some smaller fractional sil- 
ver, nickel, and copper coins, which are legal 
tender for limited amounts. 



CHAPTER XII 



BRITISH CURRENCY 



In England John Doe would have paid for 
the boots with a sovereign, a coin containing 
113 grains of gold and some alloys. The 
balance would be returned in silver coins of 
less value than their stamped denominations, 
but accepted freely for small amounts. There 
are no notes circulated in England, except 
those issued by the Bank of England, and the 
smallest denomination is ;£5, sometimes called 
five sovereigns, equal to 565 grains of gold. 
These notes are secured in part by the debt of 
the nation to the bank, but all additional issues 
must be secured to their full aniount by gold 
held in the bank's vault for the redemption 
of them. It is in consequence no advantage 
95 



96 A Primer of Political Economy 

to the bank to increase the issue of notes, as 
the gold itself could be loaned as profitably. 
In Scotland and Ireland there are banks 
authorized to issue circulating notes of ^i 
and upwards. The amount they are per- 
mitted to issue was restricted by legislation in 
1845, to their average circulation for the twelve 
months preceding May i, of that year. The 
privilege of issuing notes was thus secured to 
the banks which then possessed it, but there 
is no provision for the establishment of new 
banks of issue. For any issue of notes in 
excess of the amount authorized in 1845 the 
banks must hold an equal amount of gold and 
silver coin, the silver to be not more, in amount, 
than one-fourth of the gold. Provision is made 
for the uniting of banks and the combining of 
their authorized note issue. 

All these weights used in coinage seem irreg- 
ular and Hkely to confuse, but the lack of regu- 
larity comes from reluctance to change the 



British Currency 97 

standards. When people are accustomed to 
use a coin of a certain weight they know its 
value in all the things they buy and sell. They 
know how much cloth, how much coal, how 
much sugar, and how much flour a dollar or 
a sovereign will buy, and the coin comes to 
fill in their minds the place of a standard of 
value. A change in the weight of the coin 
would throw all calculations into confusion. 
There is consequently a reluctance to change 
the coinage weights. When laws have been 
enacted fixing regular standards for other 
weights and measures, the coins have not been 
changed, hence their weights are irregular 
when compared with the standards used in 
weighing ordinary commodities. The Cana- 
dian cent has been made regular, being exactly 
one inch in diameter and weighing the one- 
hundredth part of a pound. But as it is only 
a token, and the value of the metal it contains 
is of little consequence, it could be made of a 



98 A Primer of Political Economy 

regular weight without disturbing any calcula- 
tions as to value. The same could not be done 
with gold coins without causing confusion as 
to values, although the use of ounces and 
grains, instead of dollars might remove false 
theories as to standards of value. 

Governments recognize the need of facilitat- 
ing the transfer of raw metal into coin. Almost 
all debts are contracted in the form of obliga- 
tions to pay, not the raw metal or bullion, but 
currency in some recognized form. If the 
transfer of raw gold into coin were a difficult 
matter it might cause serious embarrassment. 
The British standard for coining is 22 parts 
of pure gold and 2 parts of alloy, and anyone 
taking such gold to the mint can obtain it 
back in coins with but a very slight deduction 
for the work. For an ounce of standard gold 
the mint gives back, £,1, 17^., and loj^. in coin. 
For those who do not wish to wait for the mint- 
ing process, the Bank of England is obliged 



British Currency 99 

to pay ;£3, i/i-., and 9^., when the gold is 
presented. Silver is not thus coined on private 
account, as it is cheap and the people would 
use it exclusively as long as they could get rid 
of it at its token value. The Government limits 
the silver coinage, and retains the difference 
between the cost of the metal and the stamped 
or token value of the coins. 

John Doe gave the merchant more money for 
the boots than was paid to the manufacturer 
for them. The difference or profit of the mer- 
chant exemplifies the method of remunerating 
for the work of distribution. After a great 
factory has turned out a consignment of boots, 
they must be distributed to the people who 
want them. Whether the man who distributes 
them goes along the road with them in his 
wagon day after day, or gathers all kinds of 
boots from different factories in a store that 
buyers may look them over and make their 
choice, the service he renders purchasers is the 
LofC. 



100 A Primer of Political Economy 

same in principle. He saves them the trouble 
of going from factory to factory, and he does 
work that would otherwise have to be done 
under greater inconvenience at the factories. 
It has been found advantageous for merchants 
to gather various lines of goods together and 
hold them to await the convenience of cus- 
tomers. If John Doe were forced to go all 
over the country to obtain his supplies he 
would find it as great a task as the cultivation 
of his farm. It is more profitable for him to 
pay the merchant an advance on factory prices. 
If the merchant asks too great an advance or 
profit for the service he renders, some one else 
will be attracted by the large profits and start 
an opposition establishment. This free com- 
petition tends to regulate the profits of the 
merchant, and make them coincide with the 
value of the work he performs. He is a useful 
member of the community rendering a service 
as necessary as that of the whaler, the miner, 



British Currency lOi 

the tanner, or the factory hand. It is not only 
necessary that boots be made by the labor of 
scores of hands in all quarters of the world, 
cooperating consciously or unconsciously. The 
boots must be held to suit the convenience of 
customers, and every one who takes them must 
be made to return payment. The payment 
must be transmitted to the workers in many 
lands, who have done their part in the compli- 
cated task of production. The same is true of 
every other line of merchandise, and all who 
contribute toward the consummation of this 
complicated result in production and exchange, 
whether they be laborers, mechanics, overseers, 
merchants, carriers, or bankers, are serving use- 
ful functions. 



CHAPTER XIII 

PAYING ALL THE WORKERS 

We have seen how John Doe, by growing 
wheat, paid the merchant for a pair of boots, 
but have not seen how he paid all the men, 
who, years before, and in different parts of 
the world, cooperated in the many lines of 
work necessary to their production. We must 
see how he pays the Gaucho who galloped 
at night after the stampeded herd of cattle, 
the whaler who fired his harpoon or threw 
his lance into the oily monster of the ocean, 
the workmen whose flesh and bones have 
been eroded in the stifling air of the alkali 
works, the Brazilian who slashed his way 
through the malarial swamps of the Amazon, 
the miner who worked by candle-light in the 

I02 



Paying all the Workers 103 

dark and dripping tunnels of the mountains, 
all down to the busy workers in the factories, 
and the clerk who served behind the counter. 
This difficult and necessarily complicated work 
is achieved by the instrumentality of capital, 
which is the saved results of labor in the 
past, devoted to increasing the productive 
power of present or current labor. While 
men work with a view to satisfying their im- 
mediate wants only, results are necessarily 
meagre, for it is impossible for each to con- 
fine himself to one special occupation. The 
Esquimau makes his own boots, the many 
slow processes entailing much patient labor. 
In a modern shoe factory a man will stand 
day after day putting on rough heels, but 
such specializing cannot be accompHshed 
without the saved results of past labor, in the 
shape of machinery, buildings, and abundance 
of material, also food, clothing, and other nec- 
essaries for the workers, during the time that 



104 -^ Primer of Political Economy 

must elapse between the production and con- 
sumption of their goods. When a workman 
in a factory put heels on the boots which 
were bought by John Doe, he caused the ma- 
terial with which he was working, the leather 
and nails, to become more valuable than they 
were before. They were brought by his 
labor nearer to a condition in which they 
would be serviceable to man. But some time 
must elapse before John Doe will want them 
and be willing to give the wheat from his 
farm for them. During the interval the work- 
man is putting heels on scores of boots, but 
must depend for his living, for the satisfac- 
tion of his immediate wants, on the saved re- 
sult of past labor. Without that he must live 
like the Esquimaux, hunting and fishing for 
daily maintenance and taking time to make 
boots for himself. 

When the Indians gathered maize or corn 
for their immediate wants only, these wants 



Paying all the Workers 105 

were but poorly supplied. But they learned 
the advantage of gathering more, for seeding 
purposes, instead of leaving that to the uncer- 
tain processes of nature. In that precaution- 
ary work they became capitalists, devoting 
the saved results of past labor to making 
present labor more productive. They also 
made rude implements for turning over the 
soil. In making digging flints as well as 
in making bows, arrows, and other weapons 
of the chase, they were working, not to sat- 
isfy immediate needs, but to increase the re- 
sults of future work. By this foresight and 
self-denial they brought capital into existence 
and called it to their aid. 

A shoemaker working alone at his bench 
does many of the later operations of making 
shoes. For that he requires capital, the saved 
results of past labor, and he has it in the 
form of a bench, lasts, awls, pinchers, and 
other tools of his trade. These are not di- 



io6 A Primer of Political Economy 

rectly the results of his past labor, for he 
could not make them. He began work with 
other people's tools and traded the products 
of that work for those he now possesses. He 
has also some capital in the form of money, 
and when a customer orders a pair of boots 
he buys the uppers, the soles, the leather, 
and other material needed to make them. 
When no orders are in he may have sufficient 
capital to buy material and make boots for 
future sale, thus avoiding loss of time. The 
possession of this capital, both in the form 
of tools and money is an advantage, and one 
for which the shoemaker would be wilHng to 
pay if he did not own sufficient capital him- 
self. The payment he would make for the 
use of it would be interest, a subject which 
will be dealt with more extensively in a later 
chapter. If the shoemaker works hard and 
lives frugally, he becomes able to control 
more capital. He does not gather an abun- 



Paying all the Workers 107 

dance of tools and leather about him. His 
income is greater than his expenses and he 
deposits the balance in a bank every week. 
In that way he gets the bank in his debt, and 
knows he can draw the universally desired 
gold at any time. He may have sufficient to 
buy one of the big machines in the factory, 
but it would be no use while he works alone. 
When he is able to make a bargain with a 
number of other shoemakers equally fortu- 
nate, he buys a nailing machine for use in a 
factory, another buys a lasting machine, an- 
other a sewing machine, and another an elec- 
tric motor and shafting for supplying power. 
A large number thus combining their sav- 
ings can establish a factory fully equipped 
with tools and material. By separating the 
work and each performing some single oper- 
ation, the productive power of each is in- 
creased. A factory with fifty workmen can 
produce more than double the output of a 



io8 A Primer of Political Economy 

factory with twenty-five workmen. For the 
same reason one hundred men in a factory 
can do more than double the work of fifty. 
These cooperating shoemakers may sell their 
products to a merchant, who can dispose of 
them to the wearers through retail dealers, 
or they may have their own organization 
or establishment of distribution, consisting of 
wholesale and retail stores. In either case 
they must own or borrow sufficient savings to 
maintain themselves and their factory till the 
returns from sales are available to make more 
and other purchases. 



CHAPTER XIV 

THE CAPITALIST 

The factory described in the last chapter 
would be called cooperative, because the men 
who work in it own the capital and are 
remunerated directly from the returns. Such 
factories are not nearly so common as those 
in which one man or a small company of 
men own the capital, and the workmen are 
paid in wages for their services. If a man 
wishes to start a shoe factory on that prin- 
ciple and is possessed of wealth the matter 
is easily arranged, though his possessions con- 
sist only of Canadian, United States, or British 
bonds, or other similar evidences of debt. 
These bonds cannot maintain workmen ; they 
are not machinery, leather, or other material 
X09 



no A Primer of Political Economy 

required in shoemaking; in fact, they are not 
wealth properly so called. They merely show- 
that the whole people are in debt to this 
man who desires to start a shoe factory. But 
the difficulties disappear, because the people 
in his debt are possessed of the capital or 
savings necessary to his purpose. They have 
sufficient food to maintain the workers during 
the initial stages ; clothing sufficient for similar 
demands ; brick, stone, lumber, iron, machinery, 
leather, and all essentials, or sufficient saved 
wealth to purchase the things required. If 
the people did not possess these savings the 
bondholder could not start a shoe factory nor 
any other manufacturing or commercial enter- 
prise on his bonds. If he holds bonds issued 
by a savage tribe in Africa or elsewhere, he 
cannot secure material for a factory with 
them. However deeply the tribe may be in 
his debt, if there is no prospect of the debt 
being paid the bonds are of no value. But 



The Capitalist iii 

the bonds of a solvent country he can take 
to the stock-exchange and sell for money, 
with which he pays the builders of his factory 
and buys machinery and a complete outfit of 
material. Then he can hire shoemakers and 
other necessary workers. 

At the end of a week the shoemakers have 
made his material more valuable, and he pays 
them their wages in money, which procures 
for them the things they require. Next week 
he again pays them their wages, his capital 
being thus decreased in one form, and more 
largely increased in another. Soon he has a 
large stock of finished boots which he sells 
to a wholesale dealer, receiving more than he 
paid for wages and material. The advantages 
of working together in a large force are so 
great that he can pay the shoemakers as 
much as or more than they could earn work- 
ing alone at their benches, and have a sub- 
stantial balance for himself. This balance, so 



112 A Primer of Political Economy 

far as it is derived from dividing and special- 
izing the trade, is the interest on his capital 
invested in the business. 

It is through this method of using capital 
that John Doe pays the many workers in 
various lands who assisted in making the pair 
of boots which he bought. One man decides 
to invest the wealth in his possession or at 
his disposal in a whaling expedition. By sell- 
ing it or trading it he procures a ship, fits it 
out with try-works for melting the blubber, 
barrels, harpoons, lances, small boats, and all 
the accessories of the work. He lays in a 
store of provisions sufficient to maintain the 
crew on a long voyage, and engages the 
necessary force of men. They have their 
maintenance aboard during the voyage, and 
on arrival in port are paid off, the owner's 
capital in one form being almost exhausted, 
while he is richer in the oil that has been 
gathered. For it he is paid by the currier 



The Capitalist 113 

who wants it in preparing leather. The cur- 
rier is recouped for this and other outlays 
when he sells the leather to the shoe manu- 
facturer, who is paid in turn by the mer- 
chant. Thus when Joe Doe pays for the 
boots over the counter, a part of his money 
goes to adjust the payment made to the 
whalers two years before at the end of their 
voyage. 

The miners who work the drills and hoist 
the ore in the heart of the mountain are paid 
by the owner of the mine and its machinery, 
who is paid in turn for his metal by the maker 
of shoe eyelets, and a part of John Doe's pay- 
ment recoups the merchant, the manufacturer, 
the eyelet maker, and the mine owner for 
wages paid to the miner. The Gaucho of the 
southern plains is paid by the herdsman, who 
receives his pay from the English importer or 
butcher. For the hide the butcher is paid by 
the tanner, the tanner by the currier, and the 



114 ^ Primer of Political Economy 

currier by the boot manufacturer. Through 
him and the merchant John Doe remunerates 
the Gaucho for his aid in making the pair of 
boots. 

The native Brazilian who blinks in the 
smoke is paid by the recognized owner of 
the forest, who supplies him with food, and 
through a long list of exchanges the last pay- 
ment for the rubber in the cemented joints 
of the boots is made by John Doe. In the 
same way, John finally remunerates those who 
pay the workmen who smart and smother 
in the alkali works, the men who attend the 
machines in the factory, and the clerk who 
exhibits and parcels up the boots in the mer- 
chant's establishment. The workers mentioned 
are but a few of the thousands who helped 
to make the pair of boots, the boots are but 
one of the thousands of useful articles in 
which each of their products have been con- 
sumed, and the wheat grown by John Doe 



The Capitalist 115 

goes to satisfy quite as great a multitude of 
wants. In the long transition from producer 
to consumer, some have been paid at once 
by others in a position to wait for returns. 
Those in a position to make such advances 
are called capitalists. 



CHAPTER XV 

INTEREST JOINT STOCK COMPANIES TRUSTS 

We have seen the advantage which comes 
with the possession of capital, how it enables 
the owner to wait for returns and specialize 
labor, thus increasing its product. This in- 
crease in the productive power of labor on 
account of the employment of capital is inter- 
est. In the examples considered, every man 
employing or investing capital owned it him- 
self, and obtained his interest in the form of 
increased products. The examples extended 
from the Indian who saved seed corn to the 
investor in a factory. But it is often advan- 
tageous for a man to invest or employ capital 
which he does not own. One may have special 
aptitude for managing a shoe factory but may 
ii6 



Interest — Joint Stock Companies — Trusts 117 

lack the requisite capital, while another owning 
sufficient capital may have but little ability for 
conducting the enterprise. If the latter estab- 
lishes a factory he will achieve but indifferent 
results, and the former, through the lack of 
capital, may not be able to make use of his 
ability for factory management. It is clearly 
to the advantage of him who is competent to 
manage aJactory, to borrow the capital of the 
owner, paying him a regular amount yearly for 
its use. This regular payment is another form 
of interest, and it is bargained for at a certain 
rate per cent per annum. The factory manager 
does not seek for some one who will lend him 
the necessary machinery and materials. He 
simply borrows money, agreeing to pay a cer- 
tain rate per cent yearly for its use, and to 
return it at a specified time. With the bor- 
rowed money he buys all the things needed in 
his business, just as if he owned it him- 
self. Thus while in reality he borrows a 



1 1 8 A Primer of Political Economy 

factory and all the accessories for increasing 
the productive power of labor, the recorded 
transaction is the borrowing of a sum of money 
at interest. 

This borrowing is so common that banks and 
other institutions are organized to facilitate it. 
They receive the small savings and surplus 
money of many people, and pay a low rate of 
interest on it. Their business is to lend it again 
at higher rates, the difference being the pay- 
ment for their services in concentrating the 
savings where they are needed. The differ- 
ence also makes good the many losses they 
suffer through bad debts. The banks with 
power to issue notes lend their credit, which 
serves the purpose of money, and derive a con- 
siderable advantage from that line of business. 
It is seldom that a man can borrow the entire 
amount needed to establish a manufacturing 
industry. But some of those with industries 
and business establishments already in opera- 



Interest — Joint Stock Companies — Trusts 119 

tion are continually extending the scope of their 
business beyond the limits of the capital they 
own, and are in consequence continually in 
need of advances of money at interest. In 
reality they borrow an additional machine, an 
additional supply of goods or an additional 
building for an extension of work or business. 
We have seen how a man or a set of men 
owning wealth, or having the community or 
some reliable firm in debt, can start a shoe 
factory. We have considered the cooperative 
factory, and the factory owned by a single in- 
vestor. Another common method of combining 
the capital of several persons in one industry is 
the organization of a joint stock company. If 
ten men uniting to carry on a cooperative shoe 
factory, decide to adopt the joint stock method, 
they estimate the value of their machinery, 
material, and business establishment. If it is 
;^ 1 0,000 they get a legislative act passed incor- 
porating them with a capital of that amount. 



120 A Primer of Political Economy 

That act gives legal existence to a body corpo- 
rate. Each cooperating partner, if all have 
invested equally, receives ^looo stock in ten 
shares of ^loo each. They then meet and elect 
from among themselves, a board of managers to 
conduct the business. This board holds office 
generally for a year. At every board election 
each stock-holder's vote counts according to the 
number of shares he holds. The profits or 
returns from business, above expenses, are 
divided among the stock-holders, each getting 
a yearly or half-yearly dividend, estimated as a 
certain percentage on his stock. Let us sup- 
pose that five men uniting to conduct a stove- 
foundry, obtain an act incorporating them with, 
say, $1,000,000 capital stock. One puts in 
$100,000 and receives one thousand shares at 
$100 each. Another puts in $200,000, for 
which he receives two thousand shares, and two 
others put in $50,000 each, receiving five 
hundred shares each as an acknowledgment. 



Liter est — Joint Stock Companies — Trusts 121 

The fifth has no money but has special knowl- 
edge of the business, and for that he is given 
one thousand shares. There are now five thou- 
sand shares of ^100 each, or half the total 
authorized issue owned by these five men, and 
the company has in its treasury ;^400,ooo con- 
tributed by four of its members. All five stock- 
holders vote according to the stock they hold, 
in electing a board of directors, which will 
doubtless be themselves. With the ^400,000 
they erect buildings and cupolas, buy iron, sand, 
flasks, engines, boilers, machinery, and all things 
needed for the business. They hire workmen 
and proceed with the making of stoves. Before 
returns begin to come in their capital is ex- 
hausted. They can borrow money from a bank, 
or sell some of the remaining five thousand 
shares of the ^1,000,000 capital stock they were 
authorized to issue. They offer one thousand 
shares for sale, which are bought in small quan- 
tities by a score of buyers. If the business has 



122 A Primer of Political Economy 

a good outlook the shares will sell above par, or 
bring more than ^100,000 to the business. The 
buyers of this new stock are entitled to vote, in 
proportion to their holdings, at the election of 
directors, and to have their percentage of the 
dividends declared from the returns of the en- 
terprise. 

One advantage of the joint stock method of 
partnership is ease of transfer. A man whose 
capital is invested in a shoe factory in the morn- 
ing, may sell his shares and buy others in a 
sugar refinery by noon. Before evening he 
may sell these shares and invest in a railway, a 
bank, a stove-foundry, a land company, a coal 
mine or any other enterprise. At the stock 
exchanges, shares in various enterprises as well 
as bonds and debentures of many kinds are 
continually changing hands, so that a man can 
transfer his capital from one enterprise to an- 
other many times in a day. John Doe may 
have held stock in the factory in which the 



Interest — Joint Stock Companies — Trusts 123 

boots he bought were made. Through this 
method of combining capital, great trusts are 
organized. Men unite their capital and buy 
up the stock of many shoe factories. They 
strive by the cooperation of present stock- 
holders, to bring all the factories of the country 
under a single board of directors. Such com- 
binations lessen the cost of management, man- 
ufacture, and distribution, but under some 
conditions enable owners to inordinately ad- 
vance prices to the consumers. 

The interest or dividend which capital pro- 
duces has been called the reward of absti- 
nence, not that the stock-holder Hves frugally, 
but because he refrains from consuming his 
capital and gives others the use of it. We have 
seen how abstinence or self-denial is necessary 
to bring capital into existence, and the same 
conduct is also necessary to keep it in existence. 
If John Doe had decided to buy a hat instead 
of a pair of boots, he would have lessened the 



124 ^ Pidmer of Political Economy 

demand for boots and increased the demand for 
hats. Somewhere in the great world of indus- 
try, labor would have been turned from the 
making of boots to the making of hats, although 
it might be as imperceptible as the impact of a 
pebble, thrown in the ocean, on the farthest 
shore. In the same way if a man ceases to 
abstain, and consumes his wealth in various 
forms of indulgence, labor is somewhere turned 
from the production of permanent capital to the 
production of things for immediate use. If he 
holds stock in a shoe factory he cannot eat the 
stock or amuse himself with the machinery. If 
he ceases to abstain, he sells his stock, and the 
factory goes on as before. With the proceeds 
of the sale he buys costly viands and rich ap- 
parel, has a splendid mansion, a yacht, and a 
special car built for his own use, and indulges 
in costly luxuries till all is spent. He has 
turned labor from the production of capital to 
the production of things for his personal indul- 



Interest — Joint Stock Companies — Trusts 125 

gence. Less capital has been available, in con- 
sequence, to increase the productiveness of 
labor. The public have lost to that extent, a 
loss that must be felt somewhere in the indus- 
trial world, and he has deprived himself of the 
dividends or interest he might have obtained 
as the reward of abstinence. 

Although rich men are abundant and for- 
tunes are growing, the amount of real capital 
available at any time is never large. The 
bondholder can start a shoe factory, but that 
does not prove that bonds are wealth or capi- 
tal. Bonds issued by the government are an 
evidence of the debt of the whole people to a 
few people, and could be destroyed without 
lessening the wealth of the community. Bonds 
of a railway or other corporation are records 
of its debt. Paper money, too, is an evidence of 
debt, and could be destroyed without lessen- 
ing the total wealth of the people. The value 
of land, so far as it is due to the growth of 



126 A Primer of Political Economy 

population and not to inherent productiveness, 
is an indication that the people are poor in land. 
The land titles that go to make up so many large 
fortunes could all be revoked without lessen- 
ing the wealth of the whole people. A small 
amount of actual wealth is made the basis of 
many large fortunes, which consist really of 
the debts of the whole people. The real 
capital in the world is never great. It is 
nature's law that the world must live, as it is 
described in current phrase, "from hand to 
mouth." Every extensive destruction or waste 
of capital is felt in its injurious effect on trade 
and industry. 



CHAPTER XVI 

GOVERNMENTAL INTERFERENCE 

It is natural that the men who compose 
governments and exercise authority should re- 
gard themselves better able to decide as to the 
advisability of various lines of industry than 
the people actually engaged in them. Left 
to themselves, the people adopt that which 
seems to them the easiest method of accom- 
plishing their aims. If they want stoves, and 
find it easier to grow wheat and give it in 
exchange than to make the stoves themselves, 
they will adopt the easier method. If they 
can get wheat and beef easier by weaving 
cloth or making stoves, than by sowing grain 
and raising cattle, they will adhere to weaving 
and stove making. The pressure of supply 
127 



128 A Primer of Political Economy 

and demand crowds out the more costly pro- 
cesses. But governments are often convinced 
that better methods are possible. 

If the maker of John Doe's boots imported 
the leather, that is, bought it from some one in 
England or elsewhere, it would mean that the 
people here found it more profitable to make 
something else and give it in exchange for 
the leather than to make the leather them- 
selves. That leather would be paid for with 
John Doe's wheat. The shoe manufacturer 
would not send money across to England 
when buying leather there. The currier in 
England, when seUing, would draw a bill of 
exchange on the American manufacturer and 
sell it to an EngHsh banker. It would be sent 
across to an American bank to which the 
American manufacturer would make his pay- 
ment. The English buyer of John Doe's 
wheat would not forward money across to the 
United States. The grain dealer would draw 



Governmental Interference 129 

a bill of exchange on him and sell it to an 
American bank. That would be mailed to an 
English banker who would demand payment 
from the wheat buyer. Thus the local bank 
would pay for John Doe's wheat, but would 
be remunerated by the money of the leather 
buyer, and the English banking house would 
pay for the leather and be recouped by receiv- 
ing the money for John Doe's wheat. jBoth 
transactions, though entirely independent in 
themselves, would be settled between the banks 
in a clearing house, without the shipment of 
money. In reality the leather would be paid 
for with the wheat. 

If the government decide that it would be 
profitable for the people to tan and curry their 
own leather it interferes in the matter. No 
man would undertake the business, because he 
would lose his capital. He must sell his prod- 
uct at the same price as foreign leather, and 
it might cost more than that to manufacture it. 



130 A Primer of Political Economy 

The Government agrees to give any one tanning 
and currying leather, a subsidy sufficient to 
make good the loss and yield interest on the 
capital invested. Men become more willing 
at once to engage in the work, and a new 
industry is estabUshed. The subsidy is taken 
from other people and from other industries, 
so the creation of industries in that way must 
be limited by the ability of the people to bear 
the increased burden. 

Subsidies are sometimes given for the min- 
ing of minerals, when they exist in such a 
form that it will not pay to take them from 
the ground. They are given occasionally for 
later processes such as the smelting of ore or 
the rolling of metal into bars, when the pro- 
ceeds of such industries, unaided, would not 
equal their cost. Such help is sometimes 
given to promote methods of disposal which 
would otherwise be unprofitable and conse- 
quently abandoned. Exportation is the 



Governmental Interference 131 

method generally assisted. Germany, France, 
and Austria have given large sums of money, 
from year to year, to the men who have exported 
sugar. These subsidies have made serious 
additions to the people's burden of taxation. 
The sugar was sold chiefly in England, so 
cheap that it did not pay the cost of manu- 
facture and transportation, but the loss was 
made good to the exporters by the subsidies. 
Sometimes the Government furnishes seed to 
farmers, at public expense, to induce them to 
change their crops or methods, or supplies 
live stock, or the material for various indus- 
tries. 

Another method of aiding industries is by 
a protective tariff. Instead of giving the tan- 
ner and currier direct subsidies to make good 
their loss, a tariff is imposed on imported 
leather. This enables the makers of leather 
to charge the shoe manufacturer a price suffi- 
cient to make the business profitable. The 



132 A Primer of Political Economy 

shoe manufacturer could not charge the in- 
creased cost to the merchant without the pro- 
tection of an import tariff on boots and 
shoes. This also is imposed, and John Doe 
instead of paying taxes for a direct subsidy 
to the leather maker pays it in the higher 
price of his boots. This is referred to in a 
previous chapter on taxation. 

An import tariff on pig-iron enables the 
smelter to charge a price sufficient to make 
his work profitable. The tariff on bar-iron 
enables the owners of rolling mills to recoup 
themselves for this higher price. The tariff 
on machinery enables the foundry-men and 
machinists to recoup themselves for the 
higher prices of bar- and pig-iron. The shoe 
manufacturer who buys machinery at the ad- 
vanced price, is compensated by the higher 
price obtainable through the tariff on boots, 
and John Doe makes his contribution when 
buying a pair. The aiding of one industry 



Gover7i7nental Interference 133 

necessitates the compensatory aiding of many. 
In Britain they have abandoned all such aids, 
the Government proceeding on the assump- 
tion that the people actively engaged in the 
numerous methods of producing wealth are 
best able to decide what is profitable and 
should be continued, and what is unprofitable 
and should be abandoned. 



CHAPTER XVII 

SCHEMES FOR BETTERMENT 

The British Government abandoned inter- 
ference with the production of wealth, chiefly 
on account of its influence on distribution. 
The corn laws, a tariff on imported grain, 
enabled the farmer to charge excessive prices 
for food supplies. It was argued that the 
farmers who sold food and hired labor had 
all the advantage, and that the workmen 
who sold their labor and bought food had no 
protection. The same argument is still ad- 
vanced against the protection policy — that it 
gives no compensation to workmen, who must 
buy the taxed articles and sell their labor in 
open competition. The British people suf- 
fered from low wages and dear goods, till 
134 



Schemes for Betterment 135 

there was widespread distress. It was thought 
that perfect freedom to manufacture and ex- 
change, to buy and sell, to work at any em- 
ployment and to make the best bargain 
possible on all occasions, free from a restric- 
tive tariff, would enable every man to get the 
exact value of the service he rendered the 
community. It was complained that the men 
who worked hardest and produced most, were 
not the richest, but generally the poorest, and 
to remedy that, all the laws obstructing trade 
or industry — all laws helping one method of 
wealth production at the expense of another 
were abolished. 

We have seen how, when labor is aided by 
capital, the product is shared between the 
worker and the owner of the capital. The 
reward of the laborer is called wages, whether 
he works for a stipulated wage or employs 
himself at some primary occupation, such as 
fishing or gathering wild fruit. The reward 



136 A Primer of Political Economy 

of the owner of capital is called interest, 
whether he loans it at a stated rate per cent, 
or employs workmen to operate his machinery 
while he sells the products of their labor. A 
workman may use his own machinery and 
capitalj as in the case of a blacksmith with 
his own forge and anvil, a fisherman with his 
own boats or nets, or a shoemaker with his 
own tools and material. In such cases the 
returns received would be part wages and 
part interest, but the distinction between 
them should be clearly maintained. Another 
element to be considered in the problem of 
distribution of wealth is rent, which, in its 
economic sense means the return which goes 
to the owner of the land. Land is a term 
used to imply, not merely the soil of the 
farm and the area of the city lot, but miner- 
als, forests, water and all nature's material 
gifts to man. It is man's most enduring 
possession, though its value may fluctuate or 



Sche^nes for Betterment 137 

entirely disappear by the movement of popu- 
lation or other influences. The machinery 
used in the shoe factory was taken from the 
land by human labor, and by the processes 
of nature will return to the land again. 
There is consequently a difference between 
owning the machinery and owning the land. 
A barrel of water taken from the lake and 
carried to where it is wanted becomes valu- 
able. Labor has been profitably expended on 
it. But by the laws of nature that water will 
return to the lake again. That exemplifies 
the difference between owning the barrel of 
water and owning the lake, which is land in 
an economic sense. The food and clothing, 
the houses, the machinery, all the wealth with 
which we are surrounded has been taken 
from the land by human labor and must re- 
turn to the land again. The portion of the 
products of labor which goes to the owner of 
the land is called rent, and in large cities 



138 A Primer of Political Economy 

where there are great opportunities for trade, 
land becomes very valuable through rent being 
extremely high. The yearly value of a location 
for a store is estimated in rent, and that deter- 
mines the value of the site. As cities increase 
in size the returns to the landowners become 
proportionately large. The principle of land 
valuation is explained in Chapter VIII. 

The abandonment of governmental inter- 
ference with trade and manufacture in Britain 
did not bring about all the good results ex- 
pected. Although workers were trying to sell 
their labor to the best advantage, men, women, 
and children were obliged to work unreason- 
ably hard in factories and workshops for a 
meagre living, and the increased productive 
power of their labor through the use of machin- 
ery did not make much improvement in their 
condition. 

The failure of machinery and the combi- 
nation of working forces to bring plenty to 



Schemes for Betterment 1 39 

all, has been attributed to the increase of pop- 
ulation beyond the capacity of the country 
to sustain it, but the defect is quite as marked 
in new and unsettled countries as where popu- 
lation is dense. Distress prevails because there 
seem to be too many hands ready to do all the 
work necessary for human maintenance and 
comfort. Disappointing results have led to two 
attacks on the existing organization of indus- 
trial society, from diametrically opposite stand- 
points. The Socialists declare that freedom 
of contract, as exemplified in Britain, has not 
given every man a proper return for the ser- 
vice he renders, nor even a near approach to it 
— that abundant luxuries are enjoyed by those 
who do nothing to create them and render no 
service to others, while those who work hard 
and produce wealth have but a scanty living. 
As a remedy they would abolish freedom of 
contract, and turn over all this complicated 
mechanism of production and distribution to 



140 A Primer of Political Economy 

the supervision of the governments of various 
nations. They would impose on the authori- 
ties the duty of seeing that each rendered his 
share of useful service and received his share 
of the necessaries and luxuries of life. They 
make an appeal to the higher nature of man, 
and claim that each should work, not for 
his personal advantage, but for the good of his 
fellow-men. They say that the command to 
man to love his neighbor as himself, should be 
carried into every walk of life. As a first step 
toward their proposed change they seek to turn 
the railways and machinery of transportation 
over to the national governments, and the 
water, gas, and street-car services over to the 
municipal governments. 

The Individualists also admit the failure of 
the existing system to give each an adequate 
return for his services, but claim that it is not 
due to freedom of contract but to the absence 
of that condition. They say that workmen sell 



Schemes for Betterment 141 

their labor for far less than its actual produc- 
tive power because they do not enjoy freedom 
of contract. They claim that labor is sold 
under stress or duress, because workers are 
denied the right to employ themselves, that the 
sale of labor is not a free contract unless all 
have an equal right of access to the earth's 
surface, that is, an equal right to what econo- 
mists call land. It is their contention that past 
generations had no right to parcel the land 
among themselves, as it is the heritage of the 
whole human race — that a man denied his 
equal share in this heritage must sell his labor, 
not in a free contract, but at a great disadvan- 
tage. He cannot employ himself, and must 
accept whatever somebody else is willing to 
give him. Freedom to trade as in Britain is 
but a short step toward freedom of contract, 
and the right of self employment by access to 
land is an essential not yet secured. It is 
claimed that the apparent overcrowding of 



142 A Primer of Political Economy 

population is due to the fact that the present 
system induces men to obtain land before they 
want to use it, and to hold it till the pressure of 
population increases its value. Those Individ- 
ualists who confine their attention to agricul- 
tural land would throw it open to the public, 
under such regulations as would secure to each 
worker the product of his labor, and prevent 
any one from holding a greater area than he 
could profitably use. Those who wish to restore 
urban as well as rural land to the people would 
leave existing titles untouched, but would turn 
over the rental value of all land to the Govern- 
ment in lieu of all other taxation. This, they 
claim, would put the whole people in the posi- 
tion of the landlord, or collector of economic 
rent, would remove the chances of gain which 
now induce men to take land and hold it at a 
high price before they want to use it, and 
would leave unused land free and open to the 
unemployed. The practical efforts of this cult 



Schemes for Betterment 143 

take form in the gradual shifting of taxation 
from trade and the products of industry to land 
according to its value. While the Socialists 
attribute existing evils to free bargaining in the 
sale of labor and its products, the Individualists 
attribute them to the absence of such freedom 
in bargaining. Whatever system may be in 
vogue we must live by labor, by satisfying each 
other's wants, and the wealth which our labor 
takes from the land must return to it again 
after having served our purpose. 



INDEX 



Bleaching Powder (Making), 

Chap. IV., 22. 
Bonds, national, 72, 8^; as 

security, 84; not wealth, 125. 
Borrowing money is borrowing 

capital, 119. 
Breakfast table, supplied from 

every quarter of the globe, 

xi. 
British Currency, Chap. XII., 95. 

Canadian currency system, 73, 
74; bank notes, 74; Govern- 
ment notes redeemable, 75, 
76. 

Capital, saved results of labor, 
103; permits specializing, 
104; in tools and material, 
105; sustains industry till 
products are available, 108; 
appearing as the debts of 
others, 109; must be tangible, 
no; limited in extent, 125. 

Capitalist (The), Chap. XIV., 
109; in a position to make 
Bills of exchange, 128. advances, 115. 

1 Authorities referred to are not mentioned in the text, but 
should be consulted on the subjects with which their names are 
connected. 

145 



Abstinence, necessary to bring 
capital into existence and to 
preserve it, 123; rewarded 
by interest, 123. 

Alloys used to harden coins, 71. 

Altruism (Engels, " Social- 
ism, Utopian and Scien- 
tific"; Lawrence Gronlund, 
"The Cooperative Common- 
wealth"), 140. 

Anticipating changes in de- 
mand, 48. 

Bank notes (see Money) i, 72; 
sustained by confidence, 78; 
issued in excess of gold held 
to redeem them, 97; Bank of 
England notes, 95; Bank 
notes in Scotland and Ire- 
land, 96. 

Banks, inspection sustains con- 
fidence in, 78; minimum capi- 
tal, 78; advantages of note 
issues, 80; facilitate lending, 



146 



Index 



Capitalistic production, 109. 

Clearing House balances, 129. 

Coinage of precious metals, 71 ; 
quantities, weight, and fine- 
ness, 71; saves people the 
trouble of weighing, 87. 

Coins, 2, 73; coins equal in 
denomination to notes, 75; 
parity of gold and silver, 87 ; 
coinage ratio, 89; weights, 
89 J weights changed, 90; 
irregular, 96; facilities neces- 
sary, 98; British standard, 
98; small charge for the ser- 
vice, 98. 

Coins and Currency, Chap. X., 
72. 

Commerce, its intricate nature, 
xiv; is barter, 129. 

Competition regulates rewards, 
100. 

Confusion in official guidance, 
vi. 

Cooperation, unconscious, 42, 
50; in a factory, 107, 109. 

Corn Laws, British (Augustus 
Mongredin, " History of the 
Free Trade Movement in 
England "), 134- 

Credits must be realized to be 
used as capital, in. 

Debts, bonds, evidences of 
(Adams, "Public Debts"), 
^I'y obligations to deliver 



coin, 98; the savings of a 
worker, 107; debts of oth- 
ers are not capital, 109. 

Dependence, mutual, in pro- 
ductive work (Adam Smith, 
" Wealth of Nations "), 42. 

Desires satisfied with least ex- 
ertion, 45, 49, 50. 

Distribution as essential as 
production, 99; complicated, 

lOI. 

Dividends, 120. 

Division of labor, increased re- 
sults, 40. 

Division of labor (Adam Smith, 
" Wealth of Nations "), 66. 

Dollar, 2; its meaning, 74; its 
weight, 74. 

Economics, a knowledge of, 

essential to citizenship, vii. 
Education at public expense, 

vii. 
Electors the supreme authority, 

vi. 
Esquimaux, primitive methods, 

103. 
Exertion, satisfy desires with the 

least (Ricardo, " Principles 

of Political Economy"), 45. 
Exports paid for with imports, 

128. 

Fifty workers directly employed 
to make a boot, 41. 



Index 



147 



Fortunes, the debts of the 
whole people, 126. 

Fractional coins, 72, 81, 94. 

Free trade (R. T. Ely, " Prob- 
lems of To-day "), 63. 

Gathering India Rubber, Chap. 
VI., 27. 

Gauchos (herdsmen) help to 
make boots, 7. 

Gold, used uncoined as money, 
71; currency, 83. 

Government Interference (Her- 
bert Spencer," Social Statics," 
edition of 1873 and recent 
essays ; Thomas Hobbes, 
"Elements of Law, Natural 
and Politic," Arnold Toyn- 
bee, "Industrial Revolution 
of Eighteenth Century"), 
Chap. XVI., 127. 

Greenbacks, 73. 

Gresham's law, that coins of 
less value drive coins of 
greater value out of circula- 
tion, %%. 

Herdsman of the Plains (The) 

Chap. I., I. 
How Oil is Obtained, Chap. 

II., 8. 

Imports paid for with exports, 

128. 
In the Heart of a Mountain, 

Chap. III., 15. 



Indians, their money, 69; pro- 
duced capital, 105. 

Individualism (Henry George, 
" Protection or Free Trade "), 
140. 

Industry specialized, 103. 

Interest, payment for the use of 
capital, 106; increase in the 
product of labor through the 
specializing of industry, 112, 
116; percentage for the loan 
of capital, 117; borrowing 
money is borrowing capital, 
118; reward of abstinence 
(W. N. Senior, "Principles 
of Political Economy"), 123; 
reward of capital, 136. 

Interest — Joint Stock Compa- 
nies — Trusts, Chap. XV., 
116. 

John must pay for the Boots, 

Chap. IX., 64. 
Joint stock companies, 119; 

easy transfer of ownership, 

122. 

Labor adds value to material, 
104 ; makes an advance to 
the capitalist, iii. 

Land, source of all wealth, 
(Henry George, "Progress 
and Poverty "), 43 ; its value 
not wealth, 126; all wealth 
must return to it, 137. 

Law of Supply and Demand 



148 



Index 



(John Stuart Mill, "Princi- 
ples of Political Economy "), 
Chap. VII., 42. 

Legal tender (W. Stanley 
Jevons, " The Mechanism of 
Exchange"), 76; legal tender 
laws do not give value to 
notes but coerce creditors, 
76. 

Lending money and credit, 118. 

Making Bleaching Powder, 
Chap. IV., 22. 

Marginal utility (Bohm-Ba- 
werk " Positive Theory of 
Capital"; Smart, "Intro- 
duction to the Theory of 
Value"), 46. 

Merchant renders useful service, 
100. 

Miners help to make boots, 21. 

Money, of material that every 
one wants (W. Stanley 
Jevons "The Mechanism of 
Exchange"), 68; Wampum, 
69. 

Mutual dependence in wealth 
production, 42. 

National Bank, organization, 84. 

National Bank notes, 72; 
notes equal in denomination 
to coins, 75; redeemable, 
85; accepted by Govern- 
ment, 86. 



National Banks, Gold and 

Silver, Chap. XL, 83. 
Paper currency, willingness 

and ability to redeem it gives 

it value, 76; its nature, 77 ; 

sustained by confidence, 77 ; 

not wealth, 125. 
Paying All the Workers, Chap. 

XIII. , 102 ; through the use 

of capital, 113. 
Paying all who helped to make 

the boots, 65. 
Population increasing faster 

than sustenance (T. R. Mal- 

thus, "An Essay on the 

Principles of Population " ; 

Bonar, "Malthus and his 

Work"), 139. 
Primitive conditions, 65, 103. 
Production of wealth infinitely 

complicated, 114. 
Products of labor increased by 

specializing, 66. 
Profits, reward for service in 

distribution, 99. 
Protective tariff (R. Ellis 

Thompson, " Protection to 

Home Industry " ; Bastiat, 

"Sophisms of Protection"), 

63. 

Ratio of gold and silver, 88. 
Redeemable paper currency, 76. 
Rent, reward of the landowner, 
136. 



Index 



149 



Rubber gatherer helps to make 
boots, 32. 

Satisfying desires with the least 
exertion, 45, 49, 50, 127. 

Satisfying each other's wants, 
xiii, I, 32. 

Saving, means getting others 
in debt, 107. 

Service rendered brings varied 
returns, xiii. 

Silver, 2 ; silver certificates, 72, 
86, 92, 93; silver fractional 
coin, 72, 82 ; silver dollar, 73; 
as currency, 83 ; free coinage 
abolished in 1873, 91 ; aiding 
miners, 91, 92 ; not coined 
on private account, 99. 

Sixteen to one, 87, 88, 89. 

Smelting ore, 19. 

Socialism (Karl Marx, " Capi- 
tal"), 139. 

Sovereign (British coin), 95. 

Specializing industry, 103; 
increases products, 107, iii. 

Standard of value, 97, 98. 

Subsidies, 130; to exporters, 

131. 

Supply and Demand (The Law 
of). Chap. VII., 42, 47, 48. 

Supplies, drawn from all 
sources, xi. 

Taxation, Chap. VIII., 51. 
Taxation (necessity for), 52 ; 



manifold, 53; on land, 53 ; 
which cheapens and makes 
dear, 54, 55 ; which cannot 
be shifted (John Stuart Mill, 
" Principles of Political Econ- 
omy"), 55 ; paid by those 
who levy it, 58, 59 ; state 
and provincial, 59; national, 
60; compels the purchase 
of home products, 62 ; pro- 
tection (Thompson, " Protec- 
tion to Home Industry "), 
63 ; free trade (Bastiat, 
"Sophisms of Protection"), 
63; shiftable (D. A. Wells, 
"Who pays your Taxes ? "), 52. 

Token coins, 72, 81, 94, 97. 

Tools are capital, 105. 

Trade, a part of the division of 
labor, 67; is barter, 128. 

Treasury notes, 73, 92, 93. 

Trusts, 123. 

Unconcious cooperation, 42, 50. 

Value, must constantly change, 
87; ratio of gold and silver, 
88 ; standard of value, 97 ; 
augmented by labor, 104. 

Wages for service, 109; reward 

of labor, 135. 
Wealth, its short duration, 44 ; 

small in the aggregate, 126. 
Whalers help to make boots, 14. 
Wampum, primitive money, 69. 



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